CAN I USE BANKRUPTCY TO ELIMINATE IRS/STATE TAX DEBT?
Yes, but it is not easy to determine. To eliminate taxes with bankruptcy it takes a knowledgeable tax professional and a bankruptcy attorney. The basic rules to eliminate taxes with a bankruptcy are:
The tax liability must be three years old or older from the "due date" of the tax return, including extensions. So, for instance, if you were to file for bankruptcy in 2014, only taxes owed from 2010 or older can qualify.
The tax returns themselves had to have been filed at least 24 months before the bankruptcy petition date. In other words, if you have failed to file returns, you can't file at the time of petition and get the amount owed discharged.
240 days must pass from the "date of assessment" of the tax. The date of assessment is approximately four weeks after the tax return is received by the IRS. The date of assessment is not the date the tax return was mailed, nor the date it was received by the IRS, nor the date it was electronically transmitted to the IRS. The exact date of assessment can be found on the Federal Tax Lien or on a computer transcript of the account for each individual year. If you owe an additional tax liability as the result of an audit, the audit amount has a different "date of assessment."
There are other detailed and complex issues that impact on whether or not you will qualify to reduce or eliminate taxes, penalties and interest owed with a bankruptcy. The Enrolled Agents at Demetriou, Montano & Associates have the knowledge and experience necessary to determine the best course of action for your situation.
If a Bankruptcy is not possible you may qualify to significantly reduce your liability with an Offer in Compromise. We can help you with those kinds of decisions.
