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Many people do not realize that you can get relief for unpaid taxes to the Internal Revenue Service in bankruptcy. In general, if you have unsecured income tax debt that was first due more that three years before you file bankruptcy, and the return was timely filed at least 240 days before the filing of the bankruptcy, then the tax debt can be fully discharged in bankruptcy.
Even if you cannot dischage the taxes, the taxes can be paid without interest in Chapter 13. Taxpayers should be aware that the automatic stay in bankruptcy stops collection actions by the IRS. This means that the IRS cannot garnish your wages or seize assets. The amount of relief that you will receive for taxes in bankruptcy will depend on the kind of tax you owe, the age of the tax as stated above, whether you prepared the return and filed it timely, the chapter you bankruptcy you file.
Liability that you have for Trust Fund taxes is not dischargable in bankruptcy. This typically includes the portion of employment taxes that the employer withholds from the employees paycheck. When you are an employer or a "responsible person" (a check signer, owner, or officer of the company) you may have personal liability for any taxes that you withhold from the employee and do not remit to the government. However, Trust Fund taxes can be paid through a Chapter 13 plan. The employer's portion of the tax (not from employees paycheck) can be discharged.
If you have a situation where you are considering bankruptcy to relieve taxes, make sure you consult with a bankruptcy attorney and a tax attorney to determine what your options are with regard to your specific situation.