Need Tax Debt Help Get A Free Consultation With A Kansas City Bankruptcy Lawyer
If you are struggling with back taxes, you may not know all the options available to help you get out from under unmanageable debt. At The Sader Law Firm, we offer free telephone consultations to determine your options. A qualified Kansas City bankruptcy lawyer from our firm will answer your questions. If filing bankruptcy or negotiating with the IRS is in your best interest, we can discuss providing those services.
Having legal counsel on your side will give you the best chance of successful debt relief and alleviate the stress of facing the IRS alone. Contact us online or to start working on a debt relief plan today.
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Is There A Way To Stop The Irs From Taking My House
As a taxpayer, you have collection due process rights. These rights require the IRS to follow certain procedures. Through this process, you might be able to stop the IRS from taking your home.
First, through the CDP, the IRS must notify you that they will seize your property by sending a 1058 letter, or âFinal Notice of Intent to Levy.â This letter must notify you of your right to a hearing with the IRS Appeals Office before that levy can occur. The CDP hearing is an opportunity for you to make arguments against seizing your home.
At this hearing, you can try to convince the revenue officer handling the case for the IRS that the house wouldn’t bring enough money to cover the mortgages and the cost of the sale. Then, you can try to get âcurrently not collectibleâ status. The IRS can give you this status if paying taxes would cause âsignificant hardship.â
Obtaining CNC status is important because the IRS wouldn’t be after your house if there was anything else of value.
CNC status isnât permanent. The IRS will review it periodically. So, itâll only buy some time if your mortgage balance is decreasing and/or the property value is appreciating . If your home is a mobile home on rented land, CNC may be a permanent solution.
There are also other ways to get tax relief to stop the IRS from seizing your homeâ¦
Managing Irs Debt With Chapter 13 Bankruptcy
For taxes that arent dischargeable in a Chapter 7 case , Chapter 13 bankruptcy might be a viable alternative. In a Chapter 13 case, youll propose a repayment plan over three to five years. The monthly amount will depend on the type of debt, the amount you owe, and how much disposable income you have.
Some debts get special treatment because of their importance, like recent income taxes, child support, and alimony. These priority debts must be paid fully over the course of the payment plan. Nonpriority debts, like older taxes and credit cards, may or may not be paid depending on how much disposable income remains after accounting for your reasonable and necessary expenses. Any nonpriority debts not paid through the plan will get discharged at the end of the case.
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What Are Some Other Solutions For Tax Debt
If unpaid tax debt has you considering bankruptcy, you may want to explore other solutions first especially in light of the complex rules for bankruptcy and taxes.
These alternatives could include entering into an installment agreement with the IRS, making a deal with the IRS to delay collection efforts, or entering into an offer in compromise. An offer in compromise is an agreement between you and the IRS that allows you to pay a reduced amount.
There are pros and cons to each of these approaches. For example, youll need to pay a user fee for an installment agreement and will owe fees, interest and possible penalties. And the IRS wont always accept an offer in compromise.
Still, because these solutions address only your tax debt and dont affect other areas of your finances as much as bankruptcy does, they could be worth considering.
A Different Way To File Taxes
The concept of bankruptcy is that you, as a debtor, surrender your right to handle your own affairs, and a trustee is appointed to oversee them, said Carl G. Archer, a bankruptcy lawyer with Maselli Warren, P.C., in Hamilton, New Jersey. Your affairs become part of an estate, the same way they would be if you were incapacitated or if you had died. The trustee’s sole responsibility is to pay creditors with any assets that aren’t exempt under federal or state law, whichever is applicable.
The confusion for taxpayers in bankruptcy springs from the requirement for the filing of two types of tax forms. One is for the individual and the other is for the bankruptcy estate.
As a Chapter 7 debtor, you would file your usual 1040 the same way you normally would any other time, Archer said. The trustee would not have anything to do with that because it’s not a debt; it’s an obligation that you have to file that paperwork with the federal government. The trustee, however, would file a Form 1041 for the bankruptcy estate.
On the other hand, if a debtor files for bankruptcy under Chapter 11, he typically remains in control of the assets and will act as the bankruptcy trustee. The debtor acting as the bankruptcy trustee is required to file both the individual 1040 individual return and the 1041 bankruptcy estate return.
In the case of a Chapter 13 bankruptcy, the debtor pays disposable income into a monthly plan to pay creditors.
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How Much Penalties And Interest Do You Have To Pay On Owed Income Taxes
Before we explain the laws requirements to discharge income taxes, you should understand how the IRS calculates the amount of penalties and interest that is owed when income taxes are not paid on time.; When you do not file and do not pay your income taxes on time, you will not only owe interest on any unpaid balance, but you may also owe penalties.
Most Taxes Can’t Be Eliminated In Bankruptcy But Some Can
Updated by Cara O’Neill, Attorney
If you’ve heard commercials offering the hope of eliminating tax debts in bankruptcy, be cautious. It’s not as simple as it sounds. Most tax debts can’t be wiped out in bankruptcyyou’ll continue to owe them at the end of a Chapter 7 bankruptcy case or have to repay them in full in a Chapter 13 bankruptcy repayment plan. In this article, learn:
- when you can discharge a tax debt
- what happens with federal liens, and
- how to manage tax debt using Chapter 13.
You’ll also learn the pros and cons of filing tax returns before or after bankruptcy.
If you’d like step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
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Chapter 7 Bankruptcy Qualifications :
- Taxes for the previous year must be paid before bankruptcy can move forward
- Income in last 6 months is not greater than your States median
- You completed credit counseling with a Federal government agency, and did a budget analysis
- You cannot pay at least $100 a month over five years
- You complete a Statement of Financial Affairs
If filed for bankruptcy in the past, then you need to add 6 months plus the amount of days your previous bankruptcy case took to any of the rules above based on time measures. If you filed for an Offer In Compromise, then the time period from filing to when the IRS disapproved it needs to be added to the 240 day rule above plus 30 days. If you dont qualify for a Chapter 7 bankruptcy, then look to apply for Chapter 13.
Taxes Owed To The Irs Could Be Discharged In A Chapter 7 Bankruptcy
Nobody wants to file for bankruptcy.; However, circumstances can spiral out of control and you can find yourself without any choice.; You were laid off from work or had unexpected medical bills. You had to make a choice between paying the monthly credit card bills or putting food on the table.; The choice is easy.; When you realize that you cant keep up with your credit card payments, you consult with your bankruptcy attorney.
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Five Tips For Bankruptcy Filers
Carl G. Archer, a bankruptcy lawyer with Maselli Warren, P.C., in Hamilton, New Jersey, offers the following tips for individuals filing bankruptcy and an income tax return.
Remember, with TurboTax, we’ll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we’ve got you covered. Feel confident doing your own taxes.
Can The Irs Take Your Home In 2021
Upsolve is a nonprofit tool that helps you file bankruptcy for free.Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we’ll never ask you for a credit card.Explore our free tool
In a Nutshell
The short answer is yes, legally the IRS can take your home. But itâs important to remember that as a taxpayer, you have options. This article explains how the IRS goes about taking someoneâs home, and what you can do to stop it from happening to you.
Written bythe Upsolve Team. Reviewed byAttorney Andrea Wimmer
If youâre going through tax issues, itâs completely normal to worry about losing your home to the Internal Revenue Service . The whole process of dealing with IRS agents and reading through complicated notices can be very stressful.
The short answer is yes, legally the IRS can take your home. But itâs important to remember that as a taxpayer, you have options. This article explains how the IRS goes about taking someoneâs home, and what you can do to stop it from happening to you.
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Official Irs Policy On Bankruptcy Filing
As of right now, no stated policy shows that the IRS targets those who file for bankruptcy.
Millions of people have filed for bankruptcy, and it would be almost impossible for the IRS to audit every single one of those people. It is not a practical consideration for them to audit everyone who files. The IRS also doesn’t have the financial resources or the staff to automatically audit everyone who files for bankruptcy.
What If My Tax Debt Is Not Dischargeable Through Bankruptcy
Bankruptcy may still be a viable option for you, even if your taxes are nondischargeable. First, when you file for bankruptcy, the courts issue an automatic stay, which suspends all collection actions by your creditors. This includes the IRS. Therefore, you will have at least temporary relief from the stress of your tax debt. Additionally, after your bankruptcy is complete, you may be in a better financial position to repay your back taxes.
Filing Chapter 13 bankruptcy may afford additional benefits, even for nondischargeable tax debt. Your priority tax debts must be paid in full by the end of the bankruptcy process, which means they will be included in your Chapter 13 repayment plan. This serves the dual purpose of allowing you to pay what you owe while also eliminating your other debts. However, you must continue to file tax returns and pay income tax throughout the bankruptcy process, which takes several years.
The IRS offers several bankruptcy alternatives which may help you manage your tax debt and avoid serious penalties. These include:
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What About Your Car Or Home
If your secured property such as a car or home is repossessed or foreclosed to satisfy your debt, the IRS will treat that situation just like your property was sold. Your taxes may be increased if the property was sold for more than you purchased or more than your tax basis. A Chapter 13 or a Chapter 7 bankruptcy can protect your property from being repossessed.
Requirements For Discharge Of Income Taxes In Bankruptcy:
There are several prerequisites that must be met before any income tax can be discharged in bankruptcy.
The minimum requirements for discharging federal or state income taxes are :
There are many exceptions and events which can extend the time periods on the above rules, so you should not conclude without having actual transcripts analyzed by an attorney expert with tax discharge issues that your taxes will or will not be discharged in a case you file.
Even if you cannot get rid of your tax debt fully in a Chapter 7 bankruptcy case, you may be able to discharge some of it, and enter into a more favorable repayment plan for the taxes than you otherwise could outside of bankruptcy in a Chapter 13 or Chapter 11 case.
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Can Tax Debt Be Discharged In Bankruptcy
While some debts are almost never dischargeable, the rules for other types of debt like tax debt arent quite so clear cut.
Its pretty complicated stuff, says Robertson B. Cohen, a bankruptcy attorney at Cohen & Cohen, P.C. in Denver.
First and foremost, neither taxes you willfully attempted to evade nor penalties for tax fraud are dischargeable in bankruptcy. And, even without fraud, income taxes are dischargeable only under limited circumstances.
There are three elements that need to be satisfied for tax debt to be dischargeable, Cohen says.
- Taxes cant be discharged in bankruptcy until at least three years after they were due. For example, 2020 taxes are due in April of 2021, so cant be discharged until April of 2024.
- You must have filed a tax return for the tax you owe and you must have filed it at least two years before your bankruptcy in order to get it discharged. So if you didnt file 2015 taxes until 2019, youd have to wait until 2021 before the debt could be discharged. And if you never filed a return, it may be impossible to get the tax debt discharged.
- Taxes must have been assessed within 240 days before your bankruptcy filing. So, if you were audited and your taxes were reassessed after Tax Day, youd need to wait until 240 days after the audit.
To determine dischargeability, we order account transcripts from the IRS, Cohen said. Often we will wait to file so we can discharge the most tax debt possible.
Advantages Under Chapter 13
Chapter 13 can handle all of your income tax debts, along with all your other debts, in one tidy package.For bankruptcy purposes you can generally have three kinds of income taxes, depending on their age and other considerations.
There are those taxes that are old enough and meet some other conditions so that they would be discharged in a Chapter 7 case. Under Chapter 13 these are lumped in with all your other general unsecured creditorscredit cards, medical debts, and suchand only paid to the extent that you have available money to do so during the course of your case. Often thats not very much because of other more important debts that must be paid ahead of the general unsecured debts.
The newer, nondischargeable taxes are priority debts, meaning that the tax itself has to be paid in full during your Chapter 13 case. BUT usually interest and penalties stop accruing throughout the payment period, which alone could potentially save you thousands of dollars. Plus the penalties that accrued before filing the case are usually treated as general unsecured debt, and therefore only paid to the extent theres extra money to pay it.
The bottom line is that at the end of a successful Chapter 13 case you would owe nothing to the IRS or any other tax authority, and usually nothing to anybody else either.
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Limits To The Automatic Stay
The auto-stay may be limited to 30 days after you file your case if you filed another bankruptcy in the previous year and voluntarily dismissed that case. This limit was put into place to prevent debtors from filing multiple bankruptcies just to hold their creditors at bay. If you filed a bankruptcy in the last year, you can request that the court extend the auto-stay, but you must first show the court that you filed your cases in good faith and not to abuse the auto-stay.
If you filed two or more bankruptcies in the previous year and voluntarily dismissed them, you will not be protected by the auto-stay, unless you prove to the court that you filed in good faith.
Additionally, a creditor can request relief from the auto-stay, meaning it can ask the court for permission to collect. Most commonly, this happens with secured debt related to real estate or cars, but the IRS can seek relief from the court if you committed tax fraud.
