No one likes thinking about their debt, but there’s something about tax debt that makes it even more threatening and overwhelming than other obligations you may have. Mail from the IRS or North Carolina Department of Revenue can cause a knot in your stomach and lead to serious financial consequences down the road. If some or all of your debt comes from back taxes, find out how bankruptcy could help you get some breathing room.
Are Taxes Dischargeable in Bankruptcy?
In some cases, money owed to the IRS or North Carolina Department of Revenue can be discharged through bankruptcy. There are several factors that affect your ability to discharge tax debt.
Some types of tax debt cannot be written off. This is why it’s important to consult a bankruptcy attorney. If you find out immediately that your debt is nondischargeable, you can make an informed decision whether or not bankruptcy is worth it. Payroll taxes, fraud penalties, and non-income taxes cannot be discharged.
The Timing of Your Tax Returns
Timing is perhaps the most crucial factor in figuring out whether or not your tax debt can be discharged through bankruptcy. Assuming that most of your debt comes from income taxes, you must meet bankruptcy standards for discharge. If you committed fraud or tax evasion, that amount cannot be discharged. Similarly, you must have filed a tax return for each year of debt you wish to discharge. If you did not file, the taxes owed for that year cannot typically be discharged in bankruptcy. But in terms of timing, as of the date your bankruptcy case is filed, more than three years must have passed since the due date of your tax return; more than two years must have passed since you filed your tax return; and more than 240 days must have passed since the IRS or State assessed your taxes. Depending on your tax situation, you may find that some years are dischargeable and others aren’t. Your attorney can look through your tax returns and help you determine your options.
Could bankruptcy give you a clean slate and a brighter financial future? Blossom Law serves families throughout North Carolina to help them reach their financial goals. Call us at (704) 271-9078 to schedule your free phone consultation.