What would you like to do?
If you file bankruptcy do you owe income tax on the amount of debts that were discharged?
This is an intriguing question considering that the IRS does consider forgiven debt to be income normally. However, I have never seen the IRS pursue any of my clients for income taxes due to forgiven debt in bankruptcy. I stay as far away from the Tax Code as possible, though the answer may lie in there.Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.
53 people found this useful
Was this answer useful?
Thanks for the feedback!
If a tax debt is owed to the IRS can filing bankruptcy settle this debt and allow you to start over?
Yes you can start over but this does have an extreme barring on your credit. You can include the years prior to three years from the tax year you owed the IRS. However any yea…rs owing after the fact, you will be responsible for. Actually, you can under certain circumstances -- mainly if enough time has gone by (except in cases involving fraud): As a result of Bankruptcy Code Sections 523 and 527, the following IRS tax is generally dischargeable: Tax penalties for non-filing, tax penalties for late payment, tax penalties for late deposit, and tax penalties for late estimated payments; and Income tax, excise tax, and gift tax which is over three years old, has been filed at least two years prior to the bankruptcy petition, and/or has been assessed as an IRS tax audit deficiency for at least 240 days. The above poster is right. I was recently discharged from a bankruptcy. When I filed for bankruptcy I owed money to the IRS. My attorney said as long as it had been THREE YEARS from the tax year that you owed the IRS it can be included in a bankruptcy.
Answer . Yes. Suprisingly it is a fairly low (I believe 7th position) claim against the assets. . Answer . Generally speaking, income tax debt can be discharged if t…he tax was assessed more than three years prior to the filing of the bankruptcy petition. Note that it is from the time the tax was actually assessed against you (generally the date you filed the return). So if you filed your 1999 tax return 5 years late, you'd still have a bit of a wait before that would be dischargeable under bankruptcy.
If a spouse files for bankruptcy in a community property state and debts are discharged can the other spouse be held responsible for the discharged amounts?
Maybe; see a lawyer.
Also keep in mind that liens are not released until the liability is paid in full regardless of the amount was dissolved by the bankruptcy.. If you file Offer In Compromise, …then any equity you have in property will be your offer amount.. Liens: . Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.. The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).. Caution! . Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.. Yes. But you are much better off to look at other options, including something oficially caled "an offer in compromise".. Bankruptcy involves everything you owe and everything you own...not just tax.. ANS . The above are, well simply wrong: Once a BK is filed, by law, no offers in compromise can be considered. The IRS will not communicate with you about the debt or an offer in compromise any longer.....IT IS AGAINST THE LAW FOR THEM TO DO SO.....it is considered trying to collect a debt, all actions for which MUST be stopped upon a BK filing.. The tax due becomes part of the BK and the IRS or other auhtorities, will file claims with the court and these debts will be handled as part of the BK, and are given a priority over many others.
We are in bankruptcy. Do we have to pay our income taxes that we owe from 2008 or can they be entered into the bankruptcy debt?
Unfortunately, you will have to pay your income taxes from 2008, even after your bankruptcy is finalized. Federal law prohibits income tax debt from being discharged, so you w…ill still owe, but you may find that they stop attempting collection until after your bankruptcy case is complete. You may want to ask your bankruptcy lawyer if he has tax experience so that he can act as your tax lawyer in dealing with the IRS to settle the debts you owe them as well.
Debt is only a small part of the equation.. You could have 1,000,000 of debt, but if you have a lot of assets too (maybe 100sK less than the debt)...BK may be unreasonable or… imprudent.. Some types of BK have income or asset restrictions for use too.. Get personalized financial and legal counsel.
get a copy of your credit report from all three credit bureaus
No you cant as far as know because you are still owing the IRSmoney witch could cause a conflict between you and the BankingAgency, Other words know what's up before you do it….
Yes. Though the amount has to be quite large. For example: A $10,000 debt would not be a proper amount of money to be considered filed for bankruptcy.
dont buy as many condoms, and you wont become bankrupt.
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve: . Qualified principal residence indebtedness: Thi…s is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners. . Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. . Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. . Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income. . Non-recourse loans: A non-recourse loan is a loan for which the lender's only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
When an individual files for bankruptcy, he/she must list down allthe creditors and debts that they have. If the bankruptcy hasalready been filed and the individual has incurr…ed new debt but hasnot yet been discharged by bankruptcy, that new debt is notincluded in the bankruptcy discharge. For an official opinion, itis advised you seek legal counsel. It is really important to seek legal advice from the expert aboutfiling for bankruptcy.
State Income Tax Claims, Federal Tax Claims, and Real Estate Taxes must be included in a bankruptcy filing. Income tax claims that are less than three years old will usual…ly be consolidated with other debts and paid over three to five years in a Chapter 13. Depending upon income and assets, income tax claims for returns that were filed more than three years before the bankruptcy can sometimes be reduced substantially in a Chapter 13 and eliminated completely in a Chapter 7. The discharge of the debt in a bankruptcy, can actually cause taxable income for the year it is discharged if not handled proerly. You will get a 1099-C for most matters concering it.
You can discharge income tax debt in bankruptcy only under certain circumstances. The rules are discussed in IRS Publication # 908. I have added a link to the one from 2009, b…ut check with your tax adviser for any updates.
Yes you can file bankruptcy. Whether or not it is dischargeable is another matter. In a Chapter 13, it could be included in your repayment plan. Not sure how it works in a Ch …7.
You can file bankruptcy at any time you like, but I will tell you that bankruptcy court does not have the authority to drop the taxes. The IRS or State may allow a payment pl…an instead of allowing them to begin confiscating property. You will still have to pay the taxes due and it may be to your benefit to work out a payment plan directly with tax department and not have to pay the legal and court fees involved with the bankruptcy.