Discharging taxes in bankruptcy.

Saturday , 5, October 2013 Comments Off on Discharging taxes in bankruptcy.

Bankruptcy Lawyer in Long Branch NJ.

Can I Discharge my Taxes in Bankruptcy?

Can I Discharge my Taxes in Bankruptcy?
The answer to this question is time sensitive. Most often debtors come into our offices seeking advice on their back income taxes.  As you will read below, they can be discharged if you meet the criteria outlined.  Most other types of taxes cannot be eliminated in bankruptcy.

What Taxes Are Dischargeable In Chapter 7 Bankruptcy?

There is a series of inquires that must be made about taxes in order to determine whether income taxes can be eliminated in a personal bankruptcy filing. Finding the answer can be quite confusing and you should consult an attorney to find if and when your taxes might be dischargeable.  If you made a fraudulent return or willfully attempted in any manner to evade or defeat a tax this would subject your taxes to the exceptions to a discharge provided in 11 USC § 523. An exception from the discharge simply means that it is not discharged (eliminated). The IRS can object to efforts to discharge tax debts if they feel that the taxpayer filed fraudulent returns, willfully attempted to evade taxes, or engaged in a pattern of tax evasion.

First Inquiry: More than three years must have elapsed from the date that the tax return was “last due”. The 3-year period commences from the most recent date the tax return was due, including any extensions to file. For example, if the taxpayer filed an extension to August 15, the 3-year period starts on that date. Otherwise, if no extension was filed the date to use to calculate the 3-year period would be April 15, of the year proceeding the tax year being considered.

Second Inquiry: Second Inquiry: In order to qualify for dischargeability the taxpayer must have filed his/her tax return more than 2 years before filing the bankruptcy, pursuant to §523(a) (1)(B). If the IRS has filed on behalf of the taxpayer, because the taxpayer failed to file, this does not qualify as a “return.”

Third Inquiry: Third Inquiry: More than 240 days must have elapsed since the date that the IRS “assessed” the tax obligation. Tax assessments can be confusing! Obtain a copy of your tax transcripts and review them with your attorney to determine tax assessment dates

If you answered yes to all three of the above inquires your taxes are dischargeable.
Liens may still be in place after taxes are discharged: Even if you are able to discharge federal tax obligations that you owe to the Internal Revenue Service, they may still have a lien on your assets if the IRS obtained a federal tax lien.
What about Discharging New Jersey Income Taxes?
The same bankruptcy rules that apply to the IRS also apply to state tax obligations.
What Taxes Cannot Be Eliminated in Bankruptcy Filings?
Most other types of taxes cannot be discharged in a bankruptcy proceeding.  These include withholding taxes, fiduciary taxes, excise taxes, and sales taxes.  On a final note the burden is on the IRS to object to the discharge of a debtor’s income taxes. However,  if the income taxes are in fact non-dischargeable based on the basic rules, the failure of the IRS to object does not make the taxes dischargeable.

The New Jersey personal bankruptcy attorneys at Riviere Cresci & Singer LLC can answer any questions you may have concerning filing Bankruptcy, or any general bankruptcy questions. If you live in New Jersey, including Howell, Jackson, and Monroe, Manalapan Lakewood call us for a free consultation to find out how we can help you.

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