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Question
I am going to file for bankruptcy. I owe the IRS taxes from back in 2004. Will that be covered in my bankruptcy?
That depends. A lawyer has to know a few additional facts. I tell my own clients that they should consult with a tax attorney. However, just to give you a flavor of the issue, the following is the general tax guidance I give my own clients:
Taxes owed to the United States or any state, county, or other governmental entity are normally nondischargeable. If you hope to discharge income taxes with your bankruptcy filing, we recommend that you obtain a complete history of your tax obligations from the I.R.S. and consult a tax professional before filing the bankruptcy. WE DO NOT PERFORM THE TAX DISCHARGABILITY ANALYSIS FOR YOU, BUT IF YOU ASK US FOR A REFERRAL WE CAN SEND YOU TO A TAX PROFESSIONAL, (AT YOUR OWN EXPENSES) WHO CAN HELP YOU WITH THE TAX ANALYSIS.
However, just so you know, income taxes will discharge if all of the following criteria are met:
1. The taxes are more than three years old at the time the Bankruptcy was filed. (The three-year period begins to run from the time the returns were due, plus any periods of extension.); Due dates are usually April 15th of the FOLLOWING year, but may be a bit later than April 15th if that day falls on a weekend or holiday.
2. If the return was not filed on time, more than two years has expired since the return was filed;
3. If there was an assessment, more than 240 days have expired from the date of the assessment; if there is a tax lien on any property which you own, the bankruptcy may not remove the lien;
4. There has been no fraud.
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Answers by Expert:
Los Angeles Bankruptcy Lawyer Leon D. Bayer
Expertise
Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/
Experience
Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.
Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.
Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.
Education/Credentials
B.A., J.D.
Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000
MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.
Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.
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