The debtor must file timely income tax returns and pay the tax. While most taxes cannot be eliminated through bankruptcy, some can. The bankruptcy experts at Burr Law Office can examine your case to see if your tax debt can be eliminated. Although it's not easy, filing for Chapter 7 bankruptcy and finding out if your debts qualify for cancellation can eliminate some of the tax debt.
State and IRS back taxes can be canceled, but only if the debt meets certain requirements. Yes, you can file for bankruptcy to resolve back taxes, but not for all your tax debts. Each chapter has a different set of requirements and processes. Chapter 7 is often a “saving grace” for anyone who is going overboard with insolvency, as it completely eliminates all taxable past tax debts.
This strategy is used for those who cannot pay their income tax debt; however, it is more difficult to obtain approval than in the other chapters of bankruptcy. Tax debts are treated differently from other types of debts when you file for bankruptcy. In most cases, taxes cannot be paid in the event of bankruptcy, but there are some exceptions, such as fraud, errors, or excessive hardship. In the bankruptcy case, the courts found that the debtors deliberately tried to evade and void their tax obligations.
There are a number of prerequisites that you must meet before you can resolve your bankruptcy tax debt. As a result, the court found that the debtor had deliberately acted to hide the assets in order to evade or void taxes. This way, you could say that your return was filed two years before the bankruptcy and settled the taxes. The Supreme Court defined a tax as a “pecuniary burden imposed on persons or property for the purpose of supporting the government” and a sanction as “an imposition imposed by law as a punishment for an illegal act.” Georgia state law required a debtor to file an amended state tax return if the taxpayer's federal tax liability changed.
In another case, although the debtor filed for bankruptcy in 1992, taxes from 1982 to 1987 were at stake. However, there is general agreement that excise taxes include sales taxes, wealth and gift taxes, taxes on gasoline and special fuels, taxes on gambling and taxes on trucks. The court ruled that, since the sanctions were imposed with respect to a transaction or event that occurred more than three years before the petition, the sanctions were enforceable. If you file for Chapter 13 bankruptcy, when the court administrator establishes a partial payment plan, your tax debt will be included in the plan.
While an unsecured debt consolidation loan would generally qualify for bankruptcy, if you used a portion of that loan to pay a non-refundable tax debt, that part of the loan would not qualify for forgiveness. Since the sanctions in question met the criteria, the sanctions were enforceable and the IRS lost again. Other tax debts, including fines imposed, are cancellable, unless the event that gave rise to the fine occurred within 3 years after the bankruptcy or is related to an underlying tax balance that is not taxable. But in general, if the taxpayer hasn't received a bill that breaks down the amount owed by tax year, the IRS probably hasn't evaluated the debt.
