“I heard you can download my fiscal debt, is it true?” The previous question is one that often arises in our Utah bankruptcy practice. Federal and state income taxes are eligible for discharge under Chapter 7 or chapter 13 of the bankruptcy code under certain circumstances.
Chapter 7 bankruptcy is a complete download of eligible debts. Chapter 13 bankruptcy is a debt consolidation and a partial refund of dues for a period of time; then eligible debts that are downloaded are paid after completion of repayment plan. As a result, under Chapter 7 or chapter 13 can be exhausted, provided that the requirements are met for the discharge.
There are five rules that determine the dischargeability of tax liabilities:
The deadline for submission of the tax return is at least three years before the bankruptcy filing.
The tax returns was “filed” at least two years before the filing of the application for bankruptcy.
The assessment of the tax is at least 240 days (starting from the date of filing of the application).
The tax return is not fraudulent.
The taxpayer is not guilty of tax evasion.
First, the tax debt must derive from a tax return that was caused by at least three years before the filing of the bankruptcy petition. This requirement includes all extensions. So if presented to an extension, calculates the period of time from the expiration date of the extension.
Secondly, the debtor has filed a return. This requirement is met when a debtor is involved (provides information and documentation) or signs on a return, pursuant to Internal Revenue Code section 6020 (a). This requirement seemingly does not include, however, a return filed in service pursuant to Internal Revenue Code section 6020 (b) where the deposit is not made with the cooperation of the debtor and is based on information obtained from tax authorities on their own.
Thirdly, the taxing authority must assess the fee at least 240 days before submitting the petition. That’s when the tax authorities Submit that is a notice of assessment or the IRS issues a certificate of assessment.
Fourth, the tax liability is only corroded unless fraudulent return file.
Fifth, the tax liability can not be downloaded if you are guilty of intentionally trying to evade taxes.
If you are satisfied with the five requirements listed above, the fees are corroded. In some cases it may be advantageous to wait to file the bankruptcy petition until the tax liabilities are corroded. If taxes are not corroded, but the debtor can’t wait to file for bankruptcy, chapter 13 bankruptcy may provide additional benefits for managing tax debt. To evaluate a particular situation and determine the dischargeability of tax debt, you should consult with an experienced bankruptcy attorney.