IRS Taxes In Bankruptcy

The IRS taxes in bankruptcy reform was passed into law in 2005. This new law makes it more difficult to get rid of tax debts through bankruptcy. It's not impossible, just harder, and more rules to follow.

It is extremely important to have a tax consultant if you are considering your IRS taxes in bankruptcy. There is a form that has to be turned in, and that form is a Substitute for Return or SFR for short.

Income tax that is less than three years old can not be discharged in bankruptcy. And of course there is the decision to make. Do I need file Chapter 7 ,or Chapter 13? It's all hard to understand, and that is why your tax representative must be have knowledge about your particular situation.

There is another thing you should be aware of is, just because you may have gotten some of your taxes discharged, it does not mean you won't lose other assets. The IRS may want to file a Notice of Federal Tax Lien prior to the bankruptcy and possibly get assets such as equity in your home, or car.

Before making the decision to file bankruptcy, try some other avenues that are offered by the IRS. One of those ways is called Offer In Compromise. This is where the IRS will usually dismiss most of the interest and penalties in order to get a full payment of the back taxes. There can also be a schedule of installments set up. The IRS will, in most cases, be willing to accept your amount due in installments. The most important thing is to make an agreement you can live with and stick to it.

If you can avoid bankruptcy it will be better for you because if you have substantial assets, this may cause a big loss for you. If you do file, you will find that Chapter 13 is the most frequent bankruptcy used by people with tax problems. This particular plan does allow a payment plan. Get with a tax adviser for the best solutions on getting you some tax relief.

Knowing what your options are before trouble starts is your best bet. Find out what your options are today at Tax Debt Knowledge.