29 Jan IS FILING BANKRUPTCY AN OPTION?
The decision to file or not to file for bankruptcy is a difficult one. Tax and non-tax considerations must be evaluated prior to making a decision to file a bankruptcy to resolve your tax debt.
One of the most important benefits of filing for bankruptcy is that it stops all IRS enforced collection actions. Once a taxpayer files a petition in bankruptcy, the IRS Collection Division must wait and cannot file liens, levies or seize a taxpayer’s business or personal assets.
Another important benefit of bankruptcy protection is that certain income tax liabilities can be discharged in bankruptcy. In general, if returns are timely filed, income tax liabilities on taxes assessed three years prior to the bankruptcy filing petition date can be discharged. The most recent three year tax liabilities can’t be discharged. Similarly payroll tax liabilities, trust fund recovery tax assessments and income tax liabilities where a civil fraud penalty was assessed are not dischargeable in bankruptcy however an extended repayment period can be negotiated.
When a taxpayer cannot qualify for an Installment Agreement or an Offer in Compromise or is threatened with the seizure of their business, they can file a Chapter 7, 11 or 13 and seek bankruptcy protection by hiring competent bankruptcy counsel.
Usually, filing Bankruptcy should be used as a last resort to resolving your tax collection issues. In some instances Bankruptcy can be used in conjunction with one of the other collection alternatives to resolve all of the tax liabilities.