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Bankruptcy and Tax Debts

Income tax debts can be discharged as it is entitled under Chapter 7 and Chapter 13 of the Bankruptcy Code. In order to free yourself from the clutches of debt, you need to hire bankruptcy service in order to discharge your tax debts.

Under Chapter 7 a person can discharge his entire allowable debts. Under Chapter 13 bankruptcy a settlement plan is designed to make the repayment affordable for the pocket. And the remaining debts that could not be paid off are usually discharged under this bankruptcy code.

Tax debt is treated in the similar way like before, under the new bankruptcy law in both Chapter 7 and Chapter 13 petitions. But you need to be aware as all tax debts are not discharged under bankruptcy code. If the following five criteria are not qualified by the bankruptcy petitioner then his tax debts would not be discharged.

Five criteria to Discharge Tax Debts

If these five criteria are fulfilled then the tax debt is dischargeable under Chapter 7 and Chapter 13 bankruptcy petitions.

1. The due date for filing a tax return is at least three years ago.
2. The petitioner has filed a tax return at least two years ago.
3. The tax assessment is at least 240 days old.
4. No forgery while tax return.
5. The taxpayer is not accountable for tax evasion.

Return due at least three years ago

The tax debt must be related to a tax return that was pending for at least three years before the taxpayer files for bankruptcy.

Return filed at least two years ago

A tax return needs to be filed at least two years before the taxpayer files for bankruptcy. The time is measured from the date of tax return filing

Tax Assessment by IRS At least 240 days old

The tax needs to be assessed at least 240 days before the taxpayer files for bankruptcy. The basis of IRS assessment is from a self-reported balance due or an IRS final determination in an audit.

Tax Return was not fraudulent

Providing fraudulent documents in the process of filing a tax return is considered to be an offence.

Taxpayer should avoid the charge of Tax Evasion

If the taxpayer is found to be evading the tax laws then his debts would not be discharged under bankruptcy code.

Form 4868 Efile : Form 4868 is an application for an automatic extension of time to file a U.S. individual income tax return. For more info please visit the site.

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