Taxes and Bankruptcy in Las Vegas
Taxes are a common reason that people are in financial trouble. Owing money to the government is overwhelming. Tax liens, seizures, levies, and wage garnishments can make it impossible for you to provide for your and your family’s basic needs. However, trying to work out a payment arrangement with the government can be difficult, if not impossible.
Filing bankruptcy to resolve tax problems might be the best solution to tax debt. Even though most tax debts are not dischargeable in bankruptcy (forgivable), filing bankruptcy for IRS debts and other tax debts can provide the relief you need to overcome a tax problem.
How Are Taxes Handled in a Bankruptcy Case?
Most tax debt is not eligible for a discharge. It does not matter if you file under Chapter 7 or Chapter 13, bankruptcy does not make tax debt go away.
If you file under Chapter 7, you will still owe the tax debts when you complete your Chapter 7 case, unless the tax debt is eligible for a bankruptcy discharge. However, getting rid of other debts in Chapter 7 can help you afford a tax repayment plan with the government.
Filing under Chapter 13 may be a better option for dealing with past tax debts. Most tax debts are priority unsecured debts. Priority unsecured debts must be paid in full through your Chapter 13 plan. However, these debts can be spread out over 60 months.
Therefore, you can take up to 60 months to pay your past tax debt in a Chapter 13 plan. By spreading out the payments over five years, you lower the monthly payments to an affordable amount. You also eliminate other unsecured debts that are eligible for a bankruptcy discharge for a small fraction of what you owe on each account.
Are Income Taxes Dischargeable in Bankruptcy?
Some old income tax debts may be eligible for a bankruptcy discharge in Chapter 7 and Chapter 13. However, you must meet very specific criteria to discharge tax debts in a bankruptcy case.
The four criteria for discharge tax debt in bankruptcy are:
- The debts must be for income tax debts;
- The income taxes you are discharging must be at least three years old;
- The tax returns that resulted in the income tax debt must have been filed at least two years before you filed your bankruptcy petition; and,
- The IRS or other taxing authority must have assessed the tax debt at least 240 days before you filed for bankruptcy relief.
If you do not meet each of the above criteria, you cannot discharge the income tax debt through a bankruptcy filing. The rules are referred to as the 3-2-240 Rule based on the time frames for each requirement.
Calculating the time frames for each requirement can be complicated. Our Las Vegas bankruptcy lawyers understand the exceptions to the general rules for calculating time periods for tax debts. For instance, filing extensions or audits could change the beginning date for calculating the time period.
We analyze your tax debts before you file for a Chapter 7 or Chapter 13 bankruptcy case. Depending on your situation, the timing of your bankruptcy filing may need to be adjusted to allow you to discharge tax debt in bankruptcy.
Contact Our Las Vegas Bankruptcy Attorneys to Discuss Foreclosure and Bankruptcy
Are you ready to get rid of tax debts and other debts that you cannot afford to pay? If so, the Nevada bankruptcy lawyers of Your Vegas Lawyers, LLC, are ready to help. Let us perform a free case review to see if filing Chapter 13 or Chapter 7 can help you resolve your debt problem.
Contact our law firm today to schedule your free consultation with an experienced Las Vegas bankruptcy attorney. You do not need to worry about how to pay debts another day. We can help you find an affordable solution to your debt problems.