Can I Get Rid of Tax Debt in a Nevada Bankruptcy?
If you have tax debt, especially tax debt that is more than a few years old, bankruptcy may be the best option to get rid of it or to make it more manageable. However, how tax debt is treated in bankruptcy is extremely complicated, so it is no wonder why so many people are confused. Many believe that good ole Uncle Sam never goes away even in bankruptcy. However, that is not always the case. In fact, bankruptcy can be the best option for dealing with tax debt. In some cases, bankruptcy can eliminate tax debt altogether, yet in other cases it can only help make it more manageable, and yet in some cases it is a combination of both. To determine which is the case for you depends on the facts and details of your particular situation, and therefore, it requires a detailed analysis.
Which Tax Debt is Potentially Dischargeable?
Federal Income Tax Debt
In order for income tax debt to be eliminated through bankruptcy, there are several requirements that must be met. They are as follows:
- The tax return filing date must be more than three years prior to the bankruptcy petition filing date;
- The tax return must have actually been filed more than two years prior to the bankruptcy filing date;
- The tax liability must have been assessed more than 240 days before the bankruptcy filing date; and
- You must not have committed fraud or attempted to evade tax liability.
If you are considering bankruptcy to handle your tax debt it is vital that you work with an experienced bankruptcy attorney before filing for bankruptcy because the timelines are extremely important in determining whether or not your tax debt will or will not be eliminated.
Who doesn't hate tax penalties? Well, the good news is that tax penalties are typically discharged along with dischargeable tax debt in bankruptcy. However, in some circumstances, penalties may be discharged even when the underlying tax debt is not.
Tax Debt That Cannot Be Eliminate in Bankruptcy
Even if your tax debts meet the requirements above, some types of tax debts are still non-dischargeable. Usually, they are business-related taxes, such as payroll taxes and sales tax—these are taxes a company must collect and pass on for someone else, such as customers or employees.
If your tax debt meets the time requirements for discharging them through bankruptcy, unfortunately, but the IRS has issued a tax lien for your tax debt then bankruptcy will not eliminate the tax lien issued prior to filing for bankruptcy.
Managing Tax Debt in Chapter 13 Bankruptcy
Just because you can't get rid of your tax debt in bankruptcy, either due to the time requirements, the nature of the taxes or a tax lien, doesn't mean that bankruptcy will not help. If you're struggling with tax debt, even if it is non-dischargeable, you may be able to find relief through a Chapter 13 bankruptcy. A Chapter 13 establishes a repayment plan for you that allows you to pay the full balance in manageable monthly installments over a three to five year period. Although Chapter 13 won't reduce the amount of tax debt, it stops further penalties from accruing during the repayment period, halts tax collection efforts, and creates a predictable repayment schedule that is based on your income and expenses.
Talk to a Nevada Bankruptcy Attorney about Your Tax Debt
Tax debts can be complicated and whether it can be discharged in bankruptcy depends on many factors. To better understand if bankruptcy is in your best interest, you should discuss your case with an experienced Nevada bankruptcy attorney. If you have questions about how declaring bankruptcy will affect your tax debt, don't hesitate to contact the experienced Nevada bankruptcy attorneys at Vohwinkel Law and schedule your free consultation. Fill out our contact form right now or call us at 702-735-1500 to schedule a free in office or phone consultation.