DISCHARGE IT: BANKRUPTCY FACTS
Facts regarding discharging taxes in bankruptcy:
- Income debts may be eligible for discharge under Chapter 7 Bankruptcy or Chapter 13 Bankruptcy of the bankruptcy code.
- Discharge is not automatic. You much meet the requirement for discharging your taxes.
- If you fail to file a return that becomes due after the date of your bankruptcy petition, the IRS may request the Court to order a conversion from a Chapter 7 Bankruptcy to a Chapter 13 Bankruptcy. This action can have cost you big time.
- Filing income taxes while in a Chapter 13 Bankruptcy is a requirement to have your plan confirmed by the Court. Debtors must file all tax returns with the IRS for the 4 year period before the bankruptcy petition can be granted for both Chapter 7 and 13 Bankruptcy.
- A bankruptcy will not remove a tax lien. See tax lien properties
- The tax return that generated the tax debt cannot be fraudulent or frivolous.
- The taxpayer cannot be guilty of any intentional act of evading the tax laws.
- Tax debts from unfiled tax returns are not dischargeable. The IRS often assesses taxes on unfiled returns, called substitute for returns (SFR). These liabilities cannot be discharged unless a taxpayer files a tax return for the year in question.