Health & Fitness
Tax Debt in Greenwich, CT: Discharge Taxes? Yes you can!
This post discusses the basics of when a tax debt may be dischargeable in bankruptcy, and the uses of bankruptcy for resolving outstanding tax debts.
The focus of our practice is assisting taxpayers with complex financial issues, including bankruptcy & financial restructuring and civil and criminal taxpayer representation, and see many taxpayers and practitioners in Greenwich, Connecticut suffer tax debts and other financial burdens. When bankruptcy is raised they inevitably state that taxes cannot be discharged.
Nothing could be farther from the truth!
Income taxes are dischargeable if they meet certain requirements, as are the accompanying penalties and interest. These rules include:
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The tax is 3-years old
The returns have been on file for at least 2 years
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Any new assessments (from an amended return or audit) are at least 240 days old
The tax is not a trust tax (payroll taxes or sales taxes)
No tax fraud was committed
The government did not file a substitute for return (SFR under IRC § 6020(b))
If the taxpayer meets these requirements the taxes will be dischargeable. For those taxes that are not dischargeable, bankruptcy chapters 11 or 13 can also have a benefit in that it uses the bankruptcy code to force an installment agreement on the IRS. Non-dischargeable taxes can be paid over 60 months (or longer), and penalties are considered unsecured debt (just like credit cards) and may be discharged even if the tax is not.
Additional benefits include the fact that IRS and State of Connecticut DRS collection stops immediately upon the filing of a Bankruptcy. So for taxpayer’s whose businesses are struggling and they need breathing room, a bankruptcy can make the difference between failure and success. By restructuring the debts, discharging those that can be discharged, and forcing a favorable payment plan on the rest, the stage is set for the business to pull out if its nose-dive and get back on track.
If you have any questions about bankruptcy or tax issues in Greenwich, Connecticut or elsewhere please feel free to contact me at (203) 285-8545 or by email at egreen@gs-lawfirm.com.
243 Tresser Boulevard, 17th Floor
Stamford, CT 06901
Ph. (203) 285-8545 x 102
Fax (203) 286-1311
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