What Are Your Options If You Cannot extraction Your Back Taxes and Irs Debt in Bankruptcy?

Asset - What Are Your Options If You Cannot extraction Your Back Taxes and Irs Debt in Bankruptcy?

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Due to the harsh reality of the current economy, more Americans are filing for bankruptcy. Although there may be a positive negative connotation attached to filing for bankruptcy, it is also an productive way for many population to get fresh new starts.

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Filing for bankruptcy is one way in which you can removal some of your tax liabilities. In fact, many Irs taxes, penalties and interest qualify for perfect 100% removal in bankruptcy. But not all.

Q: So what are your tax relief options when back taxes do not qualify for removal in bankruptcy?

A: Back taxes are not all the time dischargeable in bankruptcy proceedings. Personal income taxes, the only type of Irs back taxes eligible for discharge, are branch to a true five-part threshold test outlined in the old Faq before the bankruptcy court will even think the issue of dischargeability.

The taxpayer emerging from bankruptcy with an undischarged back-tax debt can take heart, however. As with any back-tax liability situation, a taxpayer can file an Offer in Compromise (Oic) to decide the tax debt for less than the whole owed the Irs. To qualify for the Offer in Compromise program, a taxpayer must present a convincing, well-documented case that the taxpayer has insufficient assets, or income prospects, to pay off the tax liability.

Another possibility for those emerging from part 13 bankruptcy is entering into some type of Irs installment plan to pay off the whole whole of back taxes owed. There are several variations on installment plans, which ordinarily run from three to five years. They include the accepted Irs cost plan with equal payments due over the term, a step-up plan that increases the whole of the regular payments as a taxpayer's income increases, a variable or seasonal plan that allows the installment cost to growth and decrease agreeing to improbable cash flow or cyclical income, and an installment plan with a built-in balloon cost due with the final payment.

Taxpayers unable to removal back taxes in bankruptcy can also try to be classified as "temporarily uncollectible" due to insufficient assets. The Irs statute of limitations for range of back taxes is the whole of time a taxpayer was in bankruptcy plus six months.

And keep in mind that even if taxes are dischargeable in bankruptcy, this route may not be in a taxpayer's best interests, especially if the back-taxes compulsion can be reduced without resorting to bankruptcy, which can adversely affect reputation ratings for ten years. If a taxpayer's major creditor is Uncle Sam, a tax attorney or Certified Tax Resolution specialist can pinpoint the tax relief selection that will finally result in the best resolution.

If you're one of many taxpayers out there who are struggling with how to understand the complex Irs terminology, I very suggest you take a look at our Tax Help Glossary. Don't let Irs jargon stop you from getting the tax relief you need!

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