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Historically filing bankruptcy would not eliminate any back tax debt. However, there are new rules now that include back taxes in both chapter 7 and chapter 13 bankruptcy filing! This is incredible news for many Americans!
There are rules and qualifying criteria that you must meet in order to take advantage of the new Bankruptcy IRS debt relief.
Due date for the return must be at least three years ago: the back taxes must have been due at least three years before you file bankruptcy (including any extensions).
Return Filed at least two years ago: the tax debt must be related to a tax return that was FILED at least two years before you file for bankruptcy.
Tax Assessment must be at least 240 days old: The IRS must assess the tax at least 240 days before you file bankruptcy. The assessment may be from a self-reported balance due or a final determination by the IRS after an audit.
Return MUST not be Fraudulent: the tax return in question must not be fraudulent or frivolous
Must Not Involve Tax Evasion: you must not be guilty of any intentional tax evasion!
Be aware that any tax debts owed from returns that have not yet been filed do not qualify!
Additionally in order to qualify you must be able to prove that the four years prior to your bankruptcy all have filed returns. If you have not filed for each of the four years prior to your bankruptcy you can file them up to the date of your first creditor's meeting.
The rules are strict and must be abided by however, if you meet all of the above criteria your back tax debt can be discharged, saving you thousands of dollars!
If filing bankruptcy is not an option you want to pursue, you can also contact a reputable tax professional that can help you to negotiate with the IRS on your behalf. If you can prove that you cannot afford to pay your current back tax debt you could work with your tax professional to come up with an amount you can afford and submit a request to the IRS. There are no guarantees that the IRS will accept this offer, but it is certainly worth the effort!
Remember that with each passing day the fines and interest continue to grow on back tax debt. Your balance could quickly double or even triple if you don't take some action immediately! This is no time to procrastinate; your debt can quickly become enormous if you don't take action!
