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  1. #1
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: Tax Debt Vs Bankruptcy

    The IRS and all state income tax authorities are perfectly willing to work out a payment plan if a person will just communicate with them. The fact that this has resulted in garnishment tells me that he ignored them until that was the only option they had to collect what was owed to them. It looks like he treated his child support the same way But given a $200,000 tax liability over a ten year period, at least he has decent income with which to support the child who he brought into the world, and also to pay the government as the rest of us do. He should communicate with these taxing authorities and still try to work out a payment plan he can afford.

    Whether a specific tax liability can be discharged in bankruptcy is an extremely complex piece of law, and definitely not message board material. My guess is that he could discharge some things, such as intrest that accrues during the bankruptcy proceeding and a few other items, but not the underlying tax liability.

    If any of this debt involves withheld taxes from employee payroll, he has committed the unpardonable sin in the eyes of the IRS because those are considered trust fund taxes, i.e. not his money in the first place but money that he had constodial control over and failed to forward it to the government.

  2. #2
    Join Date
    Sep 2008
    Posts
    2

    Default Re: Tax Debt Vs Bankruptcy

    Quote Quoting Bubba Jimmy
    View Post
    The IRS and all state income tax authorities are perfectly willing to work out a payment plan if a person will just communicate with them. The fact that this has resulted in garnishment tells me that he ignored them until that was the only option they had to collect what was owed to them. It looks like he treated his child support the same way But given a $200,000 tax liability over a ten year period, at least he has decent income with which to support the child who he brought into the world, and also to pay the government as the rest of us do. He should communicate with these taxing authorities and still try to work out a payment plan he can afford.

    Whether a specific tax liability can be discharged in bankruptcy is an extremely complex piece of law, and definitely not message board material. My guess is that he could discharge some things, such as intrest that accrues during the bankruptcy proceeding and a few other items, but not the underlying tax liability.

    If any of this debt involves withheld taxes from employee payroll, he has committed the unpardonable sin in the eyes of the IRS because those are considered trust fund taxes, i.e. not his money in the first place but money that he had constodial control over and failed to forward it to the government.
    No he never withheld any payroll taxes. He worked as a sub contractor, and occasionally hired some help but paid by cash without withholding anything, However since he didn’t even file his own taxes, he never sent out any 1099's to his helpers. He hasn’t worked as a sub contractor since 2004. As I research things I see that bankruptcy would not be a good thing. I have learned that the IRS has 10 years to collect a debt. However his last return he had a 3000.00 return witch of course they kept, But I noticed only 600.00 got credited to his 1998 tax debt. where is the rest?? And can they still collect on 1998? Since they applied money to that year, Does that reactivate that year for another 10 years?
    I have been encouraging him to contact the IRS, I think he does not know how to approach them, He is not well educated, And perhaps intimidated by such a large debt he has created for himself!!

  3. #3
    Join Date
    Apr 2007
    Location
    Southeastern Michigan
    Posts
    1,226

    Default Re: Tax Debt Vs Bankruptcy

    Quote Quoting Dee42
    View Post
    I have learned that the IRS has 10 years to collect a debt. However his last return he had a 3000.00 return witch of course they kept, But I noticed only 600.00 got credited to his 1998 tax debt. where is the rest??
    The rest most likely went for the interest and penalties for that years taxes.

    And can they still collect on 1998?
    If there are still taxes, penalties, and/or interest due for that year, yes.

    Since they applied money to that year, Does that reactivate that year for another 10 years?
    The Statute of Limitiations tolled (stopped ticking) when they collected the money.

    As gigirle and Bubba J stated; he needs to contact them and see if he can work something out. It's not going to get better until then, it's only going to get worse.

  4. #4
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: Tax Debt Vs Bankruptcy

    The IRS will always apply payments to the oldest debt. The due date for a 1998 tax return was April 15, 2009 so that debt is not ten years old. The money they are collecting through garnishment is also being applied to the oldest debt, and that will continue. They will garnishee and levy assets until some other arrangement is worked out.

    You dont have to be highly educated, but you do have to get help with things you don't understand yourself. For example, I've had a handyman at my house doing work all this week because I'm not good at that. But if I ignore it, my house would rot to the ground. Same kind of thing in your fiance's situation.

  5. #5
    Join Date
    Nov 2007
    Posts
    28

    Default Re: Tax Debt Vs Bankruptcy

    Bankruptcy can apply to tax debt, but it will not apply to returns that have not been filed (simply put the liability or debt has not been established). The statute of limitations (SOL) does not apply to tax return that have not been filed. The SOL begins upon the filing of a return.

  6. #6
    Join Date
    Apr 2007
    Location
    Il.(near StL,Mo.)
    Posts
    5,252

    Default Re: Tax Debts in Bankruptcy

    Agree that some unsecured income tax debts can be discharged in bankruptcy if a timely non-fraudulent return was filed. (usually taxes that were due more than 3 yrs. before bk filing). However; if there were years where no returns were filed, there is nothing that can be discharged in bk for those years. (full amt. due unless a compromise can be reached)

    I would talk to an attorney if at all possible or at least the IRS to see what can be worked out in the way of a payment plan.

  7. #7

    Default Re: Tax Debts in Bankruptcy

    Here's a good article I found

    http://www.orangecountybankruptcies.com/

    Hope it helps...

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