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Taxes Can Be Wiped Out in Bankruptcy!!!!!!!!

Taxes are scary but someone who files Bankruptcy can wipe them out if certain criteria are met. It is important to consult with an experienced bankruptcy attorney.

An experienced bankruptcy attorney can explain the steps and criteria so your taxes are reduced and perhaps wipe out in a Bankruptcy case. People incur taxes in a number of ways:

  • Claiming too many exemptions on your W2 paycheck. Sometimes people manipulate the claimed exemptions on their paychecks to maximize their pay. However, by overstating the exemptions, less taxes are taken out of a paycheck than should be. This often results in end-of-year taxes being owed.
  • Liquidating a retirement account is another way people incur personal tax liabilities. Retirement accounts are low/no tax if you wait until you are eligible to withdraw funds. People sometimes withdraw or liquidate these accounts prematurely which trigger personal tax liability.

When Can Tax Debt be Discharged?

Personal income taxes may be dischargeable if the following circumstances are true:

  • 3 years-To discharge backincome taxes, they need to be due at least three years prior to your bankruptcy filing date.
  • 2 years- Your tax return for the relevant tax years was filed at least two years prior to filing a bankruptcy petition.
  • 240 days- The IRS told you about your tax liability at least 240 days prior to filing for bankruptcy.
  • There are no events which would extend or “toll” the time periods listed above.
  • You didn’t engage in willful tax evasion or fraud, or you didn’t file a fraudulent tax return.

Taxes can be complicated!!!!!!!! If a tax lien on your property has already been placed by the IRS, that lien will still remain notwithstanding a successful bankruptcy case, discharge and closing. You need to pay off the lien in order to clear the title before you sell the property.

Understanding how taxes affect your bankruptcy case is important. While taxes can be discharged in bankruptcy, there are situations where taxes and/or a tax lien will still survive the bankruptcy case. Determining whether a Chapter 7 or Chapter 13 bankruptcy is the most appropriate course of action for is a decision for you and your skilled bankruptcy attorney. At the Law Offices of Mark L. Miller, we can help you determine what’s right for you and offer valuable advice to protect your financial future.

If you are interested in filing for bankruptcy, contact our San Diego bankruptcy attorney today.

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