Can I Include Back Owed Income Taxes in My Bankruptcy?

Posted on 29 July 2011. Tags: back taxes, drastic step, filing for bankruptcy, state median income

Many people who are filing for bankruptcy wonder if they are able to have back owed income taxes discharged during the bankruptcy process. The short answer is: Maybe. The type of bankruptcy you are filing will determine whether you can include back owed income taxes in your bankruptcy, or not. Educating yourself on the different items that can ? and cannot ? be included in your bankruptcy filing can help you make the most informed decision about your finances, and determine whether it really is economically wise to proceed with such a drastic step.

Back Owed Income Taxes and Chapter 7 Bankruptcy

In most cases, all income tax debts are discharged when you file Chapter 7 bankruptcy, but other taxes such as payroll tax will still be owed.

Income taxes must meet all of the following requirements if they are to be discharged when filing a Chapter 7 bankruptcy:

• They are solely income taxes ? no payroll taxes, trust fund taxes, or any type of debt you?ve accumulated because of a penalty from fraud
• Taxes were assessed a minimum of 240 days before you filed for bankruptcy
• The taxes are due three years from the date of your bankruptcy filing
• Your tax returns were filed at least 2 years before filing for bankruptcy
• You have not committed any type of fraud or are guilty of tax evasion
• You have proof that you filed your tax returns for the last four years

Back Owed Income Taxes and Chapter 13 Bankruptcy

When you file for Chapter 13 bankruptcy, only some of your back taxes may be discharged and most have to be repaid over the next three to five years. You will be set up with a repayment plan that usually runs three years, unless you are making less than the state median income, in which case it will be about five years.

Income taxes must meet all of the following requirements if they are to be discharged when filing a Chapter 13 bankruptcy:

As you can see, it?s not very easy to have your income taxes discharged when you are filing bankruptcy. It is in your best interest to work with a bankruptcy attorney to determine what types of debts can be discharged, and what you need to do to request a discharge of income taxes owed.

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Tags: back taxes, drastic step, filing for bankruptcy, state median income

Source: http://www.ramoney.com/can-i-include-back-owed-income-taxes-in-my-bankruptcy/

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