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| *The Commerce Journal>>>Other Taxes |
How do I eliminate back taxes owed? |
Can you declair back taxes in a bankruptcy? I owe so much money to the IRS but am in a new line of work and don't make even close to what I used to? In theory, bankruptcy may eliminate tax debts that are over 3 years old (provided you filed them over 3 years ago, if you have unfiled returns, then they are "post-petition" debts). However, it is very complicated. If IRS has a Federal Tax Lien on file, then even if the debt is discharged, they have a claim on any "exempt" assets that were not part of the bankruptcy (in most cases, your home). Due to recent bankruptcy "reform" very few people can take advantage of Chapter 7 (forgiveness) and most end up in Chapter 13 where you pay back your creditors a portion of what you owe over time. An Offer-in-Compromise with IRS is possible in some rare cases where you might be able to pay IRS less than what you owe. However, it is very tough to qualify for!!! Don't be fooled by some commercial about settling for "pennies on the dollar." You have to be very hard up to get an Offer approved. One option is a payment plan with IRS that may result in tax only being paid until the statute of limitations expires. They have 10 years to collect on any filed return, after that the tax expires (unless extended by judgement, bankruptcy or Collection Due Process). In some cases you might be allowed to enter into a payment plan that will not pay the tax off by the statute and the balance will expire. Again, you have to qualify. See an Attorney, CPA, or good EA. You're going to have to negotiate a payment schedule with your IRS agent. You can try to negotiate a lower amount to pay. Doesn't hurt to ask. Bankruptcy does not alleviate tax debt. Your best solution is to work with the IRS to reduce the amount of taxes or rescind the interest and penalties and to work out a payment schedule. You eliminate them by paying them off. Back taxes cannot normally be eliminated in BK. There are some occasional exceptions for old tax debts but current tax debts won't be cleared. As the previous poster noted, old taxes can be discharged. If you file a Chapter 13 case, you can pay off the non dischargable taxes plus interest but eliminate the penalties. Your attorney--any you really need one--should review your situation carefully before advising you which way to go. Let's see, eliminate back taxes owed. How about paying them off, that would eliminate them. For the most part declaring bankruptcy will not eliminate taxes owed. You could try offer in compromise where you pay less than the full amount that you owe to the IRS. I've attached links to offer in compromise and bankruptcy and income taxes. http://www.irs.gov/businesses/small/arti... http://www.pro1040.com/bankruptcy_still_... |
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