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I have an IRS income tax debt of 7,000 dollars. I want to Chapter 7 the debt.

Worth, IL |

I meet the conditions: taxes filed 2 years or more ago; taxes 3 yrs. old; taxes assessed more than 240 days ago; no fraudulent tax activities or evasion. The last condition concerns me. I have not been convicted of tax fraud nor evasion, however I have not made a payment to the IRS in more than 2 years (I was on a payment schedule with the IRS). My question is - does non -payment constitute tax evasion and would the IRS contest the Chapter 7 discharge of my tax debt?

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Attorney answers 5

Posted

It is my belief that you would still be eligible to have the old IRS debts removed in your bankruptcy as a default on your installment agreement would not be considered being convicted of tax fraud or tax evasion. When filing for bankruptcy, you should chose a bankruptcy attorney who has specific experience in including old IRS debt in your bankruptcy schedules. One specific issue to watch out for is to make sure that you indeed did file all of your old returns and that you are not trying to include a debt for which the IRS filed a return for you. These returns, called Substitute for Returns, will likely not be discharged in bankruptcy.

Diane L Gruber

Diane L Gruber

Posted

If the IRS filed a "dummy" return for you, the tax debt cannot be discharged in BK.

Posted

Not paying a tax debt isn't considered evasion. Hiding funds or transferring assets is considered evasion. I hope are right that your tax debt is dischargeable but I am not able to offer an opinion with the cheerful info you provided. Hope this perspective helps!

Asker

Posted

Thank you kindly for your response Ms. Bunce. I feel a large worry lifted from my shoulders thanks to your knowledge and kindness in sharing the same with me. Thank you again.

Posted

You did not mention what tax year(s) this debt is for. The 3 years starts to run on April 15th of the year following the tax year. So, if you wait until April 16, 2013 to file your BK petition, you can discharge 2009 tax debt IF you filed your 2009 tax return ON TIME in 2010.

Be sure to designate "best answer." If you live in Oregon, you may call me for more detailed advice, 503-650-9662. Please be aware that each answer on this website is based upon the facts, or lack thereof, provided in the question. To be sure you get complete and comprehensive answers, based upon the totality of your situation, contact a local attorney who specializes in the area of law that involves your legal problem. Diane L. Gruber has been practicing law in Oregon for 26 years, specializing in family law, bankruptcy, estate planning and probate. Note: Diane L. Gruber does not represent you until a written fee agreement has been signed by you and Diane L. Gruber, and the fee listed in the agreement has been paid.

Asker

Posted

Thank you for your response Ms. Gruber. IRS account transcripts note they had received my 2007 return 7/21/2008 and my 2008 return on 4/15/2009. These two yrs I owe money. Once again, I am reminded that there is always an "if, and or but" within the law and I had better retain lawyer before I make a fool of myself in a court of law. Thanks

Diane L Gruber

Diane L Gruber

Posted

If tax liens have not been filed for these years, then you can file BK and they will be discharged. They are old enough.

Posted

It sounds like you are on the right path but this can be dangerous territory to navigate on your own. I would recommend calling a bankruptcy attorney to make sure you can discharge this debt. If you haven't already, you need to obtain a transcript from the IRS for each tax year you intend to discharge as it contains all of the information your attorney will need to give you definitive answers. Hope this helps

Asker

Posted

Thank you for your sound advice Mr. Mumme. You are right, I had better retain a bankruptcy lawyer rather than do it Pro Se and botch it. The more I research bankruptcy law the more my head spins. Once again I am reminded are paid well. Thank you.

Posted

Failure to pay a tax debt is tax evasion. The IRS usually does not contest a discharge. The question is usually are the taxes dischargeable based upon the series of tests in the bankruptcy code. it is difficult to determine in advance of a bankruptcy filing if taxes are dischargeable. Items such as late returns and audits can change the formula. The IRS does a pretty good job of determining what has been discharged. I would be very reluctant to file a bankruptcy if the only reason was to discharge a tax debt. You should definitely consult with a bankruptcy attorney and a tax attorney or an accountant.

Asker

Posted

Hi Ms. Porter and thanks for your quick response. Now I am confused. You say failure to pay a tax debt is tax evasion. Another attorney on this thread says it is not. At any rate, I need an bankruptcy attorney. I have 7k in income tax debt and about 10k in other debt including 1k student loan I'd like to discharge if possible. Also, I want an IRS tax lien squashed. I looked at your website....by chance do you have a branch office in the southside or sw suburbs?

Karen Jackson Porter

Karen Jackson Porter

Posted

I meant that failure to pay a tax debt is NOT tax evasion. My office is downtown.

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