Bankruptcy, a viable option for addressing back taxes.

Bankruptcy can be a viable option for addressing back taxes in certain circumstances, but it’s important to understand that not all tax debts can be discharged through bankruptcy. Here are some key points to consider:

Types of Taxes: Federal income taxes, as well as state income taxes in some cases, may be eligible for discharge in bankruptcy, but other types of taxes, such as payroll taxes or taxes associated with fraud or evasion, typically cannot be discharged.

Chapter 7 vs. Chapter 13: In a Chapter 7 bankruptcy, eligible tax debts may be discharged completely if they meet specific criteria, including the age of the tax debt and whether you filed a legitimate tax return. In a Chapter 13 bankruptcy, you may be able to include tax debts in a repayment plan, allowing you to pay them over a period of three to five years.

Timing: To discharge tax debts in bankruptcy, they must meet certain timing requirements. Generally, the tax debt must be at least three years old, you must have filed a legitimate tax return for the debt at least two years before filing for bankruptcy, and the IRS must have assessed the tax at least 240 days before filing.

Fraud and Evasion: If you engaged in fraudulent or evasive activities related to your taxes, such as tax evasion, bankruptcy may not discharge those debts.

Other Considerations: Bankruptcy has significant financial and credit consequences. It can impact your credit score, limit your ability to secure loans and credit, and may involve the liquidation of some of your assets in a Chapter 7 bankruptcy.

Legal Advice: It’s crucial to consult with a qualified tax resolution specialist  such as a Certified Public Accountant, CPA to assess your specific situation. They can help you determine if bankruptcy is a viable option for your back tax issues or if there are alternative solutions, such as negotiating with the IRS or setting up a payment plan.

In summary, bankruptcy can be a viable option for dealing with certain types of tax debt, but it’s a complex legal process with specific eligibility criteria. Consulting with an experienced tax resolution professional such as a CPA is essential to make an informed decision and explore the best course of action for your individual circumstances.

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