Dallas Paulding Georgia Bankruptcy Lawyer: Eliminating IRS Taxes and Tax Liens in Bankruptcy
Bankruptcy isn’t the right solution for every client, but some of the primary advantages of bankruptcy include:
Ability to discharge income taxes that came due more than 3-years ago. For example: Client filed her 2011 income tax return on or before the April 15th, 2012 deadline; i.e., she did not file an extension. After April 15th of 2015 (3-years after the original due-date), those 2011 taxes – and any older tax liabilities – become completely dischargeable in bankruptcy. If an extension was filed, her 2011 income taxes are dischargeable after October 15th of 2015.
Ability to immediately stop wage garnishments, bank account levies, and all other collection activity.
Ability to consolidate non-dischargeable taxes (newer taxes, payroll taxes, and sales taxes, for example) into a 60-month repayment plan with absolutely no penalties. Furthermore, provisions in Georgia and Federal law suggest that trust-fund obligations only flow-through to a responsible corporate individual if the failure to remit was “willful.” Bankruptcy court provides a venue to challenge these taxes if the responsible individual was sufficiently removed from the day-to-day financial operations of the business.
Ability to eliminate tax liens for pennies on the dollar. When the I.R.S. files a tax lien against you, that tax lien encumbers ALL of your property. The only ways to get the tax lien released are (1) to pay the taxes in full, with interest and penalties; (2) get the IRS to agree to an offer in compromise (easier said than done), or (3) eliminate the lien and the taxes through Chapter 13 bankruptcy
For example: Client has an I.R.S. tax lien in the amount of $25,000 for 2005, 2006 and 2007 unpaid taxes. By filing a Chapter 13, Client can reduce her tax lien to the liquidation value of her personal property and equity in real estate, if any. Frequently, this value is less than $5,000. Therefore, we can eliminate the tax lien by paying $5,000 (or less) through the plan, based on Client’s ability to pay, as long as the repayment plan does not exceed 60-months. In our example, Client could pay $100 per month for 50 months. At the end of the Chapter 13 plan, the tax debt is discharged and the I.R.S. must cancel the lien.
Ability to offset 1099-C income resulting from a creditor’s cancellation of indebtedness. This “phantom income” is problematic because it usually impacts those taxpayers who can least afford to pay additional taxes. If the taxpayer filed a bankruptcy and discharged the underlying indebtedness, he or she may file a Form 982 and eliminate that tax attribute.
– Brian R. Cahn, Attorney at Law
Offices in Dallas, Cartersville, Calhoun & Dalton
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