Bankruptcy Tax Options to Get You Ready for the New YearTaxes are a debt that can really haunt an individual. In many instances, they survive bankruptcy filing, they accrue interest, and Internal Revenue Service and Franchise Tax Board can be aggressive creditors, garnishing your wages, seizing future refunds, and placing liens on the property. As an experienced California bankruptcy attorney, Winterbotham Parham Teeple, a PC is well-equipped to guide you through the bankruptcy process and advise you on the best course of action for your tax debt. Contact us at 800.400.9000 if you have any inquiries or would like a free bankruptcy consultation.

Some Taxes are Dischargeable

While it is true that most taxes survive bankruptcy filing, there are certain circumstances where taxes may discharge. If you filed your taxes timely, and the taxes are more than three years old, it may be possible that those taxes will be wiped out in your bankruptcy filing. Even if you owe for multiple years, it may be possible that some of your tax debt is forgiven. Keep in mind that there are factors that could make older taxes survive filing, and a final determination from the tax entity will be required, but a qualified bankruptcy attorney will be able to help you determine if your taxes may be eligible.

Complete And File Your Tax Returns on Time

More often than not, debtors fail to file tax returns because they are unable to pay the taxes they owe. This is understandable thinking, but it works against you. Even if you find it difficult to send a check to pay your taxes, you should file them on time.

Failure to file your taxes timely can result in fees and ultimately increasing the amount of debt you owe. Also, not filing your taxes timely could affect your ability to discharge them through bankruptcy if you end up filing bankruptcy at some point in the future. Even if you know you are going to owe taxes, it is always best to file on time, so you can determine how best to handle the payments. Even if the taxes cannot discharge, you may be eligible to file a Chapter 13 bankruptcy to pay the taxes back through the bankruptcy filing. This allows you more control over your monthly payment and enables you to pay the debt at 0% interest during that time.

Chapter 13 Filing Can Help You Get Current

If you find yourself with tax debt that cannot be discharged, many times, a Chapter 13 bankruptcy is a good option to help you get current on what you owe. Unless the taxes have been recorded as a lien, you can pay your tax debt back with no interest, allowing you to pay the taxes off sooner. Unlike a direct payment with the tax entity, the IRS and FTB cannot seize your tax refunds as long as you are in an active case. If you have a tax lien, that too can be paid through your Chapter 13 case if you qualify.

No Tax Penalties for Discharged Debt

Under normal circumstances, if you fail to pay your creditors or settle for a lesser amount, you will receive a 1099 Cancelation of Debt from the lender. This 1099 will count as taxable income that can affect your refund status and your tax bracket. When you file for bankruptcy and the debt is successfully discharged, the discharged debt is not counted against you. If you receive a 1099 from a creditor that was successfully discharged, be sure to advise a tax professional that you filed for bankruptcy.

Make a Change if You Always Owe

If you file a tax return and owe money, you must change your withholding. The idea is that your employer deducts a certain amount from your paycheck to keep you from owing money at the end of the year. The last thing you want is to pay back your taxes in a Chapter 13 filing only to end up owing again in the following years. By adjusting your tax withholding or alternatively setting aside the correct amount, you can safeguard yourself from future tax problems.

Call Winterbotham Parham Teeple, a PC For A Bankruptcy Consultation.

If you have tax debt and are struggling to pay, call Winterbotham Parham Teeple, a PC at 800.400.9000 for a consultation. We’ll review your finances and give you an unbiased assessment of your best options.