Lawyer Seeking the Elimination of Tax Debt For Clients in Oklahoma City
Many people who are struggling financially are unable to pay their taxes. Failing to pay your taxes can lead to financial penalties, which increases your debt even further. This endless cycle of tax debt can quickly get out of hand, but fortunately, help is available.
If you are unable to repay your tax debt, speak to the attorneys at Mitchell & Hammond at once. With our help, you may be able to eliminate tax debt by filing for bankruptcy.
Can You Eliminate Tax Debt By Filing For Chapter 7 Bankruptcy?
Most tax debts are not discharged in Chapter 7 bankruptcy, which means you are still obligated to pay them once your case has been closed. Income tax debt is the only type that can be eliminated by filing for Chapter 7 bankruptcy. However, income tax debt is only eliminated if it meets all of these conditions:
- You did not willfully evade paying taxes or file a fraudulent tax return.
- The tax debt must have been originally due at least three years prior to the date you filed for bankruptcy.
- You must have filed a tax return for the debt in question at least two years before filing for bankruptcy.
- The taxing authority must have assessed your debt at least 240 days before you filed the bankruptcy petition.
If your income tax debt meets these conditions, it can be discharged in Chapter 7 bankruptcy. After it is discharged, the taxing authority can no longer contact you about this debt or take legal action against you in an effort to collect the debt.
Tax debts that are not dischargeable in Chapter 7 bankruptcy include:
- Recently assessed property taxes
- FICA, Medicare, and other taxes that employers are required to withhold from employee paychecks
- Tax refunds or credits that were erroneously applied
- Certain tax penalties imposed on non-dischargeable taxes
These tax debts must be paid regardless of whether or not you file for Chapter 7 bankruptcy.
It’s important to note that filing for Chapter 7 bankruptcy will also not eliminate federal tax liens that were recorded prior to your filing date. This means if the IRS filed a lien on your property to collect unpaid income taxes before you filed for bankruptcy, the lien will remain in effect after your Chapter 7 bankruptcy case is closed. You will still be obligated to repay the tax debt when you sell your property.
Can You Eliminate Tax Debt By Filing For Chapter 13 Bankruptcy?
The rules regarding which tax debts can and cannot be discharged in Chapter 13 bankruptcy are complex.
Income taxes are classified as either priority or non-priority debts. You will have to repay priority debts in full, but there is no such requirement for non-priority debts. Income tax debt is considered a non-priority debt if it meets the following conditions:
- You did not commit fraud or willfully evade paying your taxes.
- The income tax debt was due at least three years prior to the date you filed for bankruptcy.
- The tax return was filed at least two years before your bankruptcy filing date.
- The taxing authority assessed the tax at least 240 days before you filed for bankruptcy.
Income tax debt that meets these conditions is considered non-priority debt. At the end of your repayment plan, the remaining balance on this debt will be discharged, which means you will no longer be obligated to pay it.
Priority tax debts must be paid in full. Your repayment plan must outline how you will pay priority tax debts in full over the course of three to five years. Some of the most common types of priority tax debts include:
- Sales tax
- Recent income tax
- Penalties imposed on non-dischargeable tax debt
- Certain types of employment taxes
- Tax refunds or credits that were mistakenly issued or applied
These tax debts will not be eliminated in Chapter 13 bankruptcy. Furthermore, tax liens that were filed on your property before you filed for bankruptcy will not be removed in Chapter 13 bankruptcy.
Schedule A Free Consultation With Our Tax Debt Attorneys in Oklahoma City
If you are considering filing for Chapter 7 or 13 bankruptcy to eliminate tax debt, it’s in your interest to contact the experienced attorneys at Mitchell & Hammond at once. For decades, our attorneys have guided clients through the process of filing for bankruptcy and discharging their debts. Let us help you secure financial freedom. To schedule a free consultation, call Mitchell & Hammond at 405-216-0007 or submit your information via the form on this website.