With the warm weather and return of the sounds of wildlife returning, that means that Spring is here. And with Spring, soon comes April 15th and Tax Day. This time of the year often makes many people nervous, particularly those who know or fear that they may owe some money to their Uncle Sam. This can be a particularly real fear if you have done any number of things that so many people have done in these tough times without ever thinking of the tax consequences. You may have been forced to make an early withdrawal out of your retirement account, or received a small inheritance from upon friend or family member’s passing. While you may have made the most of these types of moneys, you may have forgotten that the government will be standing there with open hand, ready to take its share.
If you have this or any number of similar situations, you may be wondering if bankruptcy could be helpful in handling this particularly large creditor, the U.S. Government (or the State of Alabama for that matter). While these situations can often be extremely complicated, and many talented lawyers go to school for an additional year or two after law school to gain another degree dealing solely with this issue, there is a helpful rule of thumb. If the income tax debt owed is for a tax year more than three years old, it is probably going to be dischargeable in bankruptcy. This means that if you file a Chapter 7 bankruptcy on April 20, 2014 and you owed the IRS $10,000.00 in back taxes, (including penalties and interest, from tax year 2010 (for which a tax return was due by April 15, 2011 unless you applied for an extension) then there is a strong possibility that the debt would be discharged. This is the case in Chapter 13 as well.
There are always exceptions however. You may have a situation in which the tax debt is older than three years, but there may be a tax lien filed by the IRS or State government on your property. This adds to the complexity of the case and limits what may be discharged by a bankruptcy. There is also a potential for the IRS or State to have recently “assessed” your tax debt, which adds an additional period of time during which the debt cannot be discharged. It is precisely because of the complexity touched upon here that if you do have a tax debt that you owe that you speak with a competent bankruptcy or tax attorney. But the bigger takeaway for you is that if you know or suspect that you owe a tax debt, it is important that you seek professional advice. Your tax debt can be dealt with, and this time of the year is the best time to address this type of problem head on.
Call or email the Elmer Law Firm today to speak with an experienced bankruptcy attorney about your tax debt today at (205) 286-8111, and schedule a free consultation to talk about your options.