When it comes to great ways to start over, there aren't many options better than declaring bankruptcy. In addition to erasing previous debt, bankruptcy also gets your old creditors off of your back, reducing your stress levels and improving your life. However, many people don't understand the intricacies of working with a bankruptcy attorney, which is why things can get confusing sometimes. On this website, check out great information about declaring bankruptcy so you can decide what is right for your situation. After all, it could really help you to get your health on the right track. Check out these blogs to find out more.
When you file for chapter 7, your personal financial situation automatically becomes the business of the bankruptcy courts. They have the right to gather information about your debts, purchases, trades, sales, transactions, and almost everything else in the months leading up to the filing date. From the filer's point of view, bankruptcy is about being free from debt and making a fresh start. From the bankruptcy court's point of view, it's about ensuring that your assets can be utilized to pay some of the creditors in a certain order. One important priority payment is the U.S. government in the form of taxes owed. Read on and find out more about how the bankruptcy courts treat tax debts.
Taxes Are Due
In most cases, filers who enter bankruptcy owing taxes will end bankruptcy still owing taxes. That is because the IRS expects to be paid regardless of the filer's financial situation. When you fill out your bankruptcy paperwork, be sure to list your tax debts even if you end up having to pay it. If you have tax debt, be sure to bring up the matter with your bankruptcy lawyer right away. You need to know whether or not you need to continue paying the debt (or honoring an installment agreement) while your case is in bankruptcy. In most cases, you have a short reprieve after you file when you can temporarily suspend tax payments, but never just make assumptions about this matter. Ask your lawyer.
Taxes May Not Be Due
Older tax debts are an exception to the rule about having to pay the debt. If the tax year in which you owe is old enough, you may be able to have that debt forgiven along with your credit card and other debts. The rules stated below sound confusing, and they can be, but each rule below has to be followed for you to have your older tax debts forgiven with a chapter 7 filing.
- Any taxes owed that are at least three years old may be eligible for forgiveness.
- The time begins counting when the taxes are filed—if you file an extension, that is the date you use.
- An assessment is when you are billed by the IRS—if the date on the assessment is at least 240 days old, the tax debt may be forgiven.
- The tax returns must not have any indication of fraud or intent to evade taxes.
- Finally, you must have filed a return for the most recent tax period—even if you owed and have not paid taxes on the more recent return, you must have at least filed the return.
Taxes are one of those financial matters that tend to be more complex and where mistakes can have great ramifications. For more information, contact local professionals like those found at C. Taylor Crockett, P.C.