Many Californians have probably already spent their tax refund checks and moved on from the stress of filing until next year.
But unresolved tax debts are a common motivations behind Los Angeles bankruptcy filings.
Los Angeles Bankruptcy Lawyer Vincent Howard wants you to know we're here to help. There is very specific criteria that the tax debt has to meet in order to qualify for discharge, but it is possible in both a Chapter 7 and a Chapter 13.
What's encouraging is that not only can a bankruptcy help you get rid of IRS income tax debt, it can also free you from local and state income tax debt as well.
As with anything else, timing in these cases is vitally important, and it matters in each of the following basic criteria:
- You have unpaid taxes that go back at least three years.
- The tax returns have to have been filed going back at least two years, even if they weren't paid.
- You have a tax assessment that is a minimum 240 days old. In order for the balance to be considered, the assessment on the tax has to have been issued some 240 days prior to the bankruptcy. Anything that is more recent is going to have to wait.
- You have to show that the tax returns you did file weren't fraudulent.
- You have to show that you aren't trying to evade your taxes. If you've ever been convicted of intentionally evading your taxes, you aren't going to stand a good chance of eliminating your tax debt through a bankruptcy.
So if you think you meet all those criteria (or if you still aren't exactly sure) your next step is to contact an experienced bankruptcy attorney who can help walk you through the next step of the process.
A lot of people worry that if they have their tax debts forgiven through the bankruptcy process that they be granted a tax return by the IRS. That's not true. Your return is the amount you have overpaid throughout the year, and it's unlikely to be affected by the fact that you filed bankruptcy that encompasses past due tax bills.
In fact, bankruptcy will likely result in you paying less taxes. That's because while most forms of debt forgiveness are essentially seen as income - and therefore taxable by the government, bankruptcy isn't like that. It's one of the very few legal ways you can be forgiven debt - and not be penalized by the government for it.
Generally, federal tax liens won't be discharged through a bankruptcy.
However, that doesn't mean there aren't options. One way that a bankruptcy can help even in those cases is to free up your income so that you can pay your tax liens.
Los Angeles Bankruptcy Attorney Vincent Howard at Howard Law can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
Publication 908, Bankruptcy Code Tax Compliance Requirements, Internal Revenue Service