Chicago – Discharge Taxes in Bankruptcy
What You Need to Know about Tax Bankruptcy in Chicago
Since bankruptcy can have a long-term negative impact on your financial life, it might be a big mistake to seek bankruptcy protection as a tax-relief option…if in the end it doesn’t relieve the tax pressure that you were seeking
to relieve in the first place.
In order to discharge taxes in bankruptcy it must meet these criteria:
1. The tax debt must be related to a return that was due at least 3 years prior to the taxpayer declaring bankruptcy
2. The tax debt must be related to a tax return that was filed at least 2 years before the taxpayer files bankruptcy
I know that the above 2 conditions are a bit confusing. Let’s see if I can clear it up a bit:
For example – if you file bankruptcy in 2007, the tax debt that you are trying to eliminate should be from a return
due in 2004 or before (meeting the requirement of #1).
If you wish to eliminate the debt due in 2004, you must have filed the return at least by 2005, which would meet the requirement in #2.
In other words, if you filed the taxes due in 2004 returns late (say in 2006), you would not be able to eliminate the debt in bankruptcy in 2007, since 2 years had not yet passed since the return had been filed.
Think that’s complicated?
That’s only the beginning. There are many complicated rules when it comes to getting your tax debt taken care of in a bankruptcy. If you are in trouble with the IRS or have received notices that you owe taxes, we can help. Call Opem Tax Resolution – The Law Office of Steven A. Leahy, PC (312) 664-6649. Call Now to schedule your FREE 1 hour Consultation!