The Tax Consequences Of Bankruptcy
It is important to note that debt discharge in bankruptcy has no income tax consequences to the individual. This is because your debt was not part of your gross income. However, the tax consequences of filing for bankruptcy depend on the type of bankruptcy you file. Individuals are often liable for tax debt after bankruptcy, particularly in the case of Chapter 13 bankruptcy.
An accurate determination of the tax consequences of filing for bankruptcy often requires an attorney with a deep understanding of the tax system here in New York. A bankruptcy lawyer like John Gonzalez can provide guidance in determining the best way to manage your tax obligations. Mr. Gonzalez sits down with his clients and carefully outlines your tax options and how these relate to filing for bankruptcy.
Chapter 13 Bankruptcy And Tax Obligations
Taxes are like any other debt, so tax debt enters a repayment plan if you file for Chapter 13 if it is a priority tax obligation. The common types of priority tax obligation include:
Penalties related to nondischargeable taxes
Some excise tax
The Minimum Qualifications For Discharging Tax Debt
There are a number of prerequisites for discharging tax debt during bankruptcy:
The discharge must be for income taxes. It cannot be for payroll taxes or penalties for fraud.
The debtor filed a legitimate tax return at least two years before filing for bankruptcy.
The debtor did not engage in willful tax evasion.
The tax debt is at least three years old.
Taxes were not assessed in the 240 days leading up to filing for bankruptcy.
A Legal Professional Is Your Best Option
There are countless details to filing taxes, more so when filing for bankruptcy. The timing is always important with unforgiving deadlines. Contact the Law Office of John Gonzalez, P.C., with branches conveniently located in Medford, Syosset or Hauppauge to understand the tax consequences of filing for bankruptcy.
Not Sure What Your Tax Obligations Are In Bankruptcy?
Contact us online today to set up a free appointment. You can also reach us at 631-451-7834.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.