Is the weight of back taxes and IRS penalties holding your financial future hostage?
Many people believe that tax debt is “permanent” and cannot be touched by bankruptcy, but that is a common misconception. Depending on the age and type of your debt, you may be able to significantly reduce or even completely eliminate what you owe the government.
There are various types of tax debt that may be eligible for dismissal under Chapter 7 or Chapter 13 bankruptcy. Rules and conditions are used to help distinguish which types of tax debt are dischargeable. Bankruptcy law outlines fixed criteria for tax debt eligibility and tax debt that can be eliminated if it meets the following requirements:
Payroll taxes, penalties for fraud, or tax debts that arise from unfiled tax returns cannot be eliminated in bankruptcy
Debtors are required by law to file a tax return regardless of their attempt to file for bankruptcy. During the court hearing, the debtor must provide a copy of their most recent tax return. After you have filed a bankruptcy petition, the trustee is in charge of filing your income tax returns for the bankruptcy estate. Once the bankruptcy case has been closed, any remaining assets in the estate will be returned to the debtor without any tax repercussions.
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