Owing back taxes can be emotionally stressful and financially overwhelming, especially when you’re struggling with other debts. The IRS has access to powerful enforcement tools, allowing them to seize assets or place levies on your property, making the problem even more urgent. Fortunately, bankruptcy law allows distressed taxpayers to eliminate their debt, as long as certain requirements are met.

How Bankruptcy Affects Your Tax Debts

Which Chapter You File

Taxes are considered priority debts, which has different meanings depending on what type you file. In a Chapter 13, your unpaid taxes must be included in your repayment plan, and aren’t dischargeable like other unsecured debts. Chapter 7 bankruptcy does allow you to eliminate your unpaid taxes, but the IRS will have to be paid before other creditors if the trustee seizes your assets.

What Criteria Must Be Met for Discharging Back Taxes

Bankruptcy law only allows you to discharge income and property taxes, and only under certain circumstances. Income tax is only dischargeable if the due date for filing was at least three years ago, the returns were sent in more than two years ago, and the actual assessment of your taxes is at least 240 days old. Property taxes, on the other hand, are eligible for discharge after just one year.

How Criminal Acts Affect Bankruptcy

If the IRS has determined that your returns were fraudulent, any tax you owe is automatically barred from discharge. Bankruptcy law prevents those guilty of tax evasion from eliminating their debts, although you may be able to include them in a Chapter 13 payment plan.

For over 22 years, Gilbert P. Kaback, Attorney at Law has provided borrowers throughout Norwich, CT, with effective advice at reasonable rates. If you’re struggling to repay your back taxes, their legal team will evaluate your options and help you achieve the relief you need. Visit their website for more on their bankruptcy law services, or call (860) 537-0874 to arrange your consultation today.