Tax Issues and Dischargeability of Taxes and Debts in Bankruptcy
Can you bankrupt tax debt? Certain tax obligations are dischargeable or can be somehow managed in bankruptcy. The primary relevant factors are the age of the taxes (determined by calculating from the date the returns were first DUE to be filed), the date of assessment of the taxes (determined by the taxing agency), the dates you filed your returns (IF they were filed) and whether you willfully attempted to evade payment of the tax by fraud.
Whether you can discharge these taxes depends on a combination of the above factors (and certain other miscellaneous factors) AND sometimes under what chapter of bankruptcy you file. More details on this can be seen on my
chapter 7 page. However, even if you cannot get rid of your taxes fully in a bankruptcy case, you may be able to discharge some of it, and enter into a more favorable repayment plan for the taxes than you otherwise could outside of bankruptcy.
Similarly, sometimes sales taxes and other taxes, such as those owed to the State Franchise Tax Board, or Board of Equalization, or Employment Development Department may also be dealt with in a bankruptcy case.
Tax Dischargeability analysis is extremely tricky and the only way to correctly determine if taxes are dischargeable in your case is to have a bankruptcy attorney with specialized tax knowledge analyze your situation. This will include obtaining an official "literal" tax transcript (record of account) from the taxing agency. This transcript can be obtained from the Internal Revenue Service by calling 1-866-860-4259. The Franchise Tax Board (State of California) is a little more difficult. Fortunately, their transcript usually tracks the Federal, unless your returns were filed at different times.
The most important thing to do if you are having tax problems is to investigate bankruptcy as a possible alternative to dealing with your taxes. This is particularly true if it has been more than three (3) years since the tax returns for the years you owe were due to be filed.
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(common misspellings include: bankrupt, bankrupsy, bankruptsy, bankrupcy, bankrupsie, bancruptcy)
