Would filing bankruptcy help me with my overdue taxes?

If you are behind on your income taxes, tax season can be an especially painful reminder for you. You may be considering the solutions to your tax problem and wonder if bankruptcy could provide the way out you are looking for. Like many questions, the answer to this one is that it depends.

Can bankruptcy discharge tax debt?

Bankruptcy may be able to discharge your tax debt outright in limited circumstances. In general, your tax debt must meet four criteria in order to be discharged:

· You must have filed your tax return for the debt at least 2 years before filing bankruptcy.

· The debt itself must have been due at least 3 years before filing bankruptcy. If you received an extension from the IRS, at least 3 years must have passed since the revised due date.

· Your tax return must be free of fraud or attempts to defeat taxes.

· The IRS must have assessed the tax debt at least 240 days before bankruptcy.

In cases where your tax debt meets these criteria, bankruptcy can help by discharging it, forever relieving you of the obligation to pay it.

What if your tax debt does not qualify?

In cases where your tax debt does not qualify for a discharge, bankruptcy still may be able to lend a helping hand. If your tax debt is a small part of your total debt load, filing Chapter 7 may be a viable solution. As Chapter 7 quickly eliminates most other debts, such as credit card and medical debts, you can soon devote more of your financial resources to your tax debt.

If your have few other debts or have a large tax debt, Chapter 13 is likely a better solution. Under the Chapter 13 payment plan, you have 3-5 years to catch up on your overdue taxes. While you are doing so, you are protected against lawsuits or wage garnishment attempts by the IRS. Additionally, if you filed your tax returns on time, you cannot be charged penalties or interest on your tax debt.

However, for some, bankruptcy is not always the ideal solution to dealing with overdue tax debt. These persons may be better suited by pursuing an offer in compromise or negotiating a payment plan with the IRS directly. To learn the best approach for you, speak with an experienced bankruptcy attorney. An attorney can consider your unique situation and recommend the best debt relief solution for you.