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Featured Article:
How To Determine Bankruptcy Tax Liability
How to Determine Bankruptcy Tax Liability
If you've filed for bankruptcy, you may not know to determine your bankruptcy tax liability. Now before this article goes any further, I'd like to make it clear that this information about bankruptcy tax liability is in no way meant to take the place of the advice of a lawyer or tax professional. It is just basic information dealing with bankruptcy tax liability for individuals that declare bankruptcy under Chapter 7 or 13.
But there are some things you have to keep in mind.
But there is one way out of this. The IRS may be forced to accept a payment plan or substantially eliminate penalties through the filing of a Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, a plan is filed with the court which determines the amount distributed to each creditor by the trustee. This means that a bankruptcy judge can force the IRS to accept extended payments on personal income tax liability through a Chapter 13 plan.
This plan works well when the IRS has a tax lien on personal property and the debtor has enough income to pay back the IRS over a three to five year period.
If you've filed for bankruptcy, you may not know to determine your bankruptcy tax liability. Now before this article goes any further, I'd like to make it clear that this information about bankruptcy tax liability is in no way meant to take the place of the advice of a lawyer or tax professional. It is just basic information dealing with bankruptcy tax liability for individuals that declare bankruptcy under Chapter 7 or 13.
File Your Return
Some people think that just because they declared bankruptcy that they don't have to file a tax return. This is not the case. You must file a tax return every year, no matter what your bankruptcy tax liability may end up being.But there are some things you have to keep in mind.
- Your bankruptcy tax liability that you put on your tax return must be honest. Do not try to get out of any bankruptcy tax liability.
- Make sure to file your return on time. Even if you were able to eliminate a good amount of your bankruptcy tax liability, you still have to file it on time.
- You must have filed tax returns with the IRS for the past 3 years. In many cases, bankruptcy tax liability can be discharged for a 3-year period.
When Does Filing Bankruptcy Not Help My Tax Liability?
Although you meet all the requirements above, personal income taxes can still sometimes be non-dischargeable in a Chapter 7 bankruptcy. This happens when the IRS has placed a tax lien on the debtor's property.In this case, the bankruptcy tax liability must be paid in full.But there is one way out of this. The IRS may be forced to accept a payment plan or substantially eliminate penalties through the filing of a Chapter 13 bankruptcy.
How Does Chapter 13 Bankruptcy Help With Bankruptcy Tax Liability?
In the case of a Chapter 13 bankruptcy, the debtor makes payments to a bankruptcy trustee. The bankruptcy trustee, in turn, pays a percentage of the payment to the creditors. If you are talking about bankruptcy tax liability , then the creditor in question is the IRS.In a Chapter 13 bankruptcy, a plan is filed with the court which determines the amount distributed to each creditor by the trustee. This means that a bankruptcy judge can force the IRS to accept extended payments on personal income tax liability through a Chapter 13 plan.
This plan works well when the IRS has a tax lien on personal property and the debtor has enough income to pay back the IRS over a three to five year period.