If you are like many Florida families, credit card payments, mortgage payments, medical bills and other financial obligations are an insurmountable amount of debt. Filing bankruptcy may help give you some breathing room. At Lewis Roberts, PA, we often assist clients in deciding when bankruptcy is the best option for their situation and help with the filing process.

Whether income tax debt is dischargeable under the Bankruptcy Codes depends on a variety of factors. IRS debts are typically prioritized after asset liquidation in Chapter 7.  However, there are some circumstances under which tax debts may be discharged in a “straight bankruptcy” (Chapter 7).

Rules for Discharging Tax Debt

The outstanding taxes must be attached to a return that was due at least three years before you file bankruptcy. This includes any extensions received. For example, if you got an extension for your 2016 tax return that deferred the due date until October 2017 you can include it in bankruptcy filed in October 2020, but not before.

Additionally, the return related to the debt must be filed at least two years prior to filing bankruptcy. The date used is from the time the paperwork was submitted, not when it was due. Debts due but have no associated tax returns are not included in the bankruptcy proceedings and are not dischargeable.

There must be an IRS assessment at least 240 days before you file for bankruptcy. The evaluation may be as a result of a self-reported balance due, an IRS audit or a proposed assessment that becomes definitive.

The tax return must be as accurate as possible and not fraudulent in any way. For example, you cannot claim pets as dependents and then file bankruptcy if the IRS rejects them. Any intentional act of evading tax laws can result in denial of discharge.

You must prove that the tax returns for the previous four years were filed appropriately, even if they were late. Copies of the most recent submitted tax forms must be presented to the court before it grants bankruptcy.

Schedule a Consultation

Bankruptcy can be a long, complicated process with a broad range of forms, deadlines and requirements. A bankruptcy attorney can help you understand what you must do and by when. While it often wipes out all credit card and medical debt, there may be obstacles to the proceedings. I may be able to help you through the hurdles to move forward with your life, virtually debt-free.

Contact me today to schedule a consultation, either in person or by phone. Our Palm Springs Dr office in Altamonte Springs is easily accessible from E Central Parkway and North St.