What do I need to know about bankruptcy and my tax obligations?

As the saying goes, the only things certain in life are death and taxes. Dealing with tax obligations can be overwhelming and stressful under the best of circumstances. If you are also facing bankruptcy in Tennessee, the situation may feel even more distressing. That is why it is important for you to know a few key facts about how your bankruptcy may influence your tax situation.

According to Fox Business, taxes may be dischargeable in bankruptcy only under certain circumstances. For instance, you must have filed your own tax return and the obligation must be for personal income taxes that are three years old at a minimum. In addition, 240 days must have gone by since the tax was assessed.

It is important to note that tax debts are never dischargeable if you have failed to file your tax returns. They are also not dischargeable if they are considered priority tax debts. Examples of priority tax debts include certain debts related to trust funds, as well as any taxes that were assessed as a result of fraud. If you file for Chapter 13, all of your priority debts, even those that are not tax-related, must be repaid.

Finally, while collection actions against you will be ceased once you file for bankruptcy, the same is not true if you are being audited by the Internal Revenue Service. The best way to make sure that you comply with all of your tax obligations while going through a bankruptcy is to consult with a tax professional. This is general information on this topic and should not be considered legal advice.

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