How Does Bankruptcy Affect My Tax Debts?

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One thing that United States citizens cannot avoid is their duty to pay income taxes. And if you find yourself in income tax debt, you may be unsure of whether this is unavoidable, as well. That is, you may be wondering whether a bankruptcy filing can offer you any type of relief. Follow along to find out if bankruptcy can affect your tax debts and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can help you wipe out as much of your debts as possible.

How does bankruptcy impact my tax debts?

First of all, tax debts are made up of the money that you owe to New York State and the Internal Revenue Service (IRS). It may be possible to eliminate your prior tax debts via a Chapter 7 bankruptcy, but this is so long as all of the following circumstances are deemed true:

  • Your tax debt in question is New York State or IRS tax debt, and not fraud penalties, payroll taxes, or other taxes.
  • You did not willingly avoid paying your taxes.
  • You did not file a fraudulent tax return to avoid paying your taxes.
  • Your tax return in question was due at least three years prior to your bankruptcy filing.
  • You filed a tax return on time at least two years prior to your bankruptcy filing.
  • Your tax debt in question was assessed by the IRS at least 240 days prior to your bankruptcy filing.

With this elimination of your tax debt, the IRS may be barred from pursuing any further collection activities, such as garnishing your wages or placing a lien on your bank account.

How can I discharge my debts?

It is worth mentioning that the New York State bankruptcy court may not grant you a guaranteed right to discharge your tax debts. That is, you may still be held responsible for them if you are found to violate bankruptcy law in any way. With that being said, in addition to meeting the aforementioned criteria, it may be in your best interest to follow the below suggestions:

  • You should provide the New York State bankruptcy court with all necessary tax documents that they request of you.
  • You should not violate the New York State bankruptcy court’s orders in any way.
  • You should not commit perjury during your bankruptcy proceedings in any way.
  • You should not commit a fraudulent act during your bankruptcy proceedings in any way.

You must make a valiant effort toward discharging all your eligible debts, but especially your tax debts. Reach out to a talented Rockland County bankruptcy attorney from The Law Offices of Allen A. Kolber, Esq. to learn how to get started on your filing.