Can Filing for Bankruptcy Make Your Tax Debt Go Away?
So you’re struggling under the weight of massive tax debt. You’ve tried to negotiate with the IRS, but they’re not budging. You can’t keep up with the payments, and you’re starting to feel hopeless.
You may be wondering if bankruptcy is an option for you. And the answer is: it depends. Bankruptcy can help you discharge some of your tax debt, but it’s not a surefire solution. There are a few things you need to know before you make any decisions.
For starters, only individuals can file for bankruptcy. If your company owes back taxes, then bankruptcy isn’t going to help you out. Second, the amount of debt that you can discharge depends on your income and assets. And finally, bankruptcy will stay on your credit report for ten years, which could make it difficult to get loans or mortgages in the future.
What Is Bankruptcy?
When most people think of bankruptcy, they think of individuals who have racked up too much debt and can’t pay it back. But bankruptcy can also be used to discharge certain tax debts.
So what is bankruptcy? It’s a legal process that can help you get rid of some or all of your debts. There are two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 is the more common type, and it’s for individuals who can’t pay back their debts. Chapter 13 is for individuals who want to keep their property, but need a lower payment plan to do so.
If you’re thinking about filing for bankruptcy, it’s important to talk to a lawyer to see if it’s the right option for you.
What Types of Debt Can Be Discharged in Bankruptcy?
So what types of debt can be discharged in bankruptcy? The answer is most of them.
There are a few exceptions, like student loans and child support payments, but essentially, just about any type of debt can be wiped out in bankruptcy. This includes credit card debt, personal loans, and even tax debt.
Now, you obviously don’t want to go bankrupt just to get out of your tax bill, but if you’re struggling to make ends meet and you can’t seem to get ahead, it’s something to consider. Bankruptcy is not an easy decision by any means, but it can provide a fresh start and allow you to get back on your feet. It is also wise to be speaking to a tax accountant with experience dealing with IRS audits and reaching a tax resolution.
What Are the Exceptions to Discharge for Tax Debt?
So, can bankruptcy make your tax debt disappear? The answer is: it depends. The most important thing to know is that there are exceptions to the discharge of tax debt.
For example, if you have committed tax fraud or you haven’t filed your taxes for a few years, your tax debt is not going to go away just because you file for bankruptcy. And if the IRS has already started legal action against you, that’s also an exception to discharge.
But if you’re current on your taxes and you have a reasonable plan for paying off your debt, then bankruptcy can help make your tax bill disappear.
How Can Dreis Accounting Services Help?
There is no one-size-fits-all answer to the question of bankruptcy, as the decision of whether or not to file for bankruptcy will depend on your specific circumstances. However, it’s important to understand the potential consequences of bankruptcy before making a decision.
Working with a tax advisor in Spokane can help you understand your options and make the best decision for your financial situation. Better yet, schedule a free consultation today!
Dreis Accounting Services is a leading tax preparation service in Spokane, WA and presently services most major areas of Washington state through our virtual accounting services.