Tax debts are a common problem for most struggling with accumulated financial burdens. Because taxes are so varied and ultimately required of every U.S. citizen able to work and own property, the debts associated with taxes are equally varied and unavoidable. While most of the time you cannot discharge tax debts with bankruptcy, there are times when it’s possible to treat those debts with Chapter 7 bankruptcy. Behm Law Group, Ltd. can help you determine if and how your tax debts can be cleared when filing for bankruptcy in Mankato, MN.
Although possible, it can be difficult to discharge your tax debts with bankruptcy. Only when your case meets several requirements can your tax debts be discharged.
Requirements for Discharging Tax Debts:
- Your tax debts must be income tax debts. While you may have several other types of tax debts, only your income tax debts can be discharged with Chapter 7 bankruptcy.
- Your tax debts must be three or more years old. If your tax debt was due at least three years before you petition for bankruptcy, these debts can be considered for discharge.
- You must have filed a return for your tax debt at least two years prior to filing your bankruptcy petition. This return must have been filed on time, your extensions cannot have expired at the time of filing, and the IRS cannot have filed a substitute return for you.
- You cannot have committed any purposeful fraud or evasion on your tax return at the time of the incurred tax debt. If courts determine you have used any means of illegal tax fraud, you cannot qualify for tax debt discharge.
- You must have your tax debt examined by the IRS 240 days before filing for Chapter 7 bankruptcy. This is called the 240-day rule, and is designed to determine whether your tax debt qualifies for discharge based on the previously listed rules. Your tax debt may also qualify for the 240-day rule if it has not yet been assessed before the time of your bankruptcy petition.
If, and only if, your tax debts meet ALL of these conditions can they be discharged with Chapter 7 bankruptcy. If you’re planning on filing for bankruptcy to rid yourself of primarily tax debts, be aware of the strict conditions. Behm Law Group, Ltd. can help you through the process of filing for Chapter 7 bankruptcy in Mankato, MN. Contact us today at (507) 387-7200 for more information.