There are certain criteria that a person should meet before including the taxes in his or her bankruptcy filing. While it is possible for IRS taxes to be included in a bankruptcy, there are a number of factors that limit which taxes can or cannot be included. Here are the conditions that you meet before filing bankruptcy:
Notes:
1. Taxes voluntarily filed at least two years ago can be integrated in a bankruptcy
2. Payroll tax or fraud penalties can never be discharged
3. It is only allowed for chapter 7 and chapter 13: that is chapter 7 indicates total, chapter 13 indicates payment plans
4. Tax returns filed 2 years ago
5. Feeling not guilty of tax evasion
6. Taxes that are not fraudulent
7. You should file four previous tax returns: It should prove that it has been filed with the IRS and filed no later than date of first creditor's meeting
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While it is possible for IRS taxes to be included in a bankruptcy, there are a number of factors that limit which ones can or cannot be included. Only federal income ones are eligible to be discharged in bankruptcy; payroll ones or fraud penalties can never be discharged. Prior filed ones are also not eligible for discharge. The discharge of federal income ones also depends on which type of bankruptcy is filed. Only chapter 7 and chapter 13 bankruptcies are eligible for federal income tax discharge. Chapter 7 bankruptcies give full discharge of allowable federal income tax debts while chapter 13 bankruptcies create a payment plan to repay a portion of the debt while the remainder is discharged.
There are five rules that assess whether income tax debts are capable of being discharged by bankruptcy. An income tax debt must meet all five of these criteria before it can be deemed to be discharged.
The first two of the five rules state that a debtor cannot include any taxes that are over three years old and that the tax returns must have been filed at least two years ago. This means that if a debtor files for bankruptcy in 2010, he cannot claim back tax debts from beyond 2006 and that the tax returns must have been filed at least in 2008.
The third criterion states that the taxes must have been assessed at least 240 days prior to bankruptcy filing. The tax return must not be fraudulent. If the debtor used a false Social security number on his/her income tax, the income tax debt will not be eligible for discharge.
Lastly, the taxpayer must not be guilty of tax evasion, meaning the taxpayer must not be guilty of any intentional acts of evading tax laws.
In addition, the bankruptcy petition is required to prove that his/her previous four income tax returns have been filed with the IRS. The four previous tax returns must be filed no later than the date of the first creditors' meeting. Petitioners must also provide a copy of their most recent tax returns to the bankruptcy court and creditors if a request is made.
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