The tax man cometh Tuesday, April 18, 2023 this year for most of us. Some businesses filed in March; some folks get extensions to October 16. Plenty of self-employed folks have to file estimated taxes four times a year. You can check out NerdWallet for a complete calendar of exciting tax deadlines! Unfortunately, some of us owe back taxes (for tax years before 2022). Is bankruptcy a viable option?

What the IRS Can Do

Despite chronic underfunding, the Internal Revenue Service (IRS) has some impressive powers. And, while a difference exists between what the IRS can do and what it will do, you should not assume you have the same Teflon^Ⓡ ability to skirt liabilities or consequences as infamous and famous folks do.

This is a brief rundown of what the IRS can do, from least intrusive to most life-altering:

1. Send you a bill for the amount you owe (triggering the collection process)
2. Compound interest daily on your outstanding tax obligation
3. Set up a payment plan to resolve your debt within 180 days, with a fee attached
4. Add additional penalties and fees as the debt remains unpaid
5. Accept from you a reduced payment under an Offer in Compromise (OIC)
6. File a Notice of Federal Tax Lien, alerting all creditors of your tax bill and placing the IRS at the front of the line in collecting debt from you

So far, not so bad, right? Oh, boy! From the IRS's own website, consider the next steps:

1. The IRS may levy (seize) assets such as wages, bank accounts, Social Security benefits, and retirement income
2. The IRS also may seize your property (including your car, boat, or real estate) and sell the property to satisfy the tax debt
3. In addition, any future federal tax refunds that you're due may be seized and applied to your federal tax liability

The IRS also can turn your tax debt over to private collection agencies. By law, those agencies are not supposed to harass or threaten you. Still, creditor harassment is a real problem.

Based on the IRS's own statements, most Texans hope to avoid running afoul of the IRS due to back taxes.

What You Can Do

Given the legal powers of the IRS to reach into your bank accounts, what can you do?

The first wise move will be to contact a bankruptcy attorney. Discuss your tax bills and organize your debt by year. The taxes you owe for 2022 cannot be discharged through bankruptcy. Other, earlier tax debt, though, may be eligible to be discharged by filing for personal bankruptcy. Even the IRS concedes this on its website.

Should you partner with a bankruptcy attorney to file for Chapter 7 bankruptcy, two important defenses will come to you in short order:

• The IRS, if listed as a creditor, will automatically be informed of your bankruptcy case by the U.S. Bankruptcy Courts, usually within a few days of filing
• Income tax debts older than three years (unless you filed late returns) will be eliminated (discharged)

Filing for Chapter 13 bankruptcy has several advantages, too:

• The IRS will automatically be informed of your bankruptcy case through the U.S. Bankruptcy Courts, usually within a few days of filing
• You can pay your tax debt through your bankruptcy, which means the IRS won't garnish your wages or seize assets
• Chapter 13 bankruptcy may discharge some of your older income tax debts (tax debts older than three years, unless you filed late returns)

Other options include Chapter 11 bankruptcy or the Offer in Compromise mentioned earlier. You can explore all your options during a consultation with your lawyer.

In all cases, an experienced bankruptcy attorney can prevent the IRS from seizing your personal property. Safeguarding your assets (home, tools, personal effects) can bring instant relief. Knowing you do not face wage garnishment by the IRS or loss of your bank accounts can also bring peaceful nights and calmer days. Think how much happier you will be knowing your Social Security benefits or retirement income are safe!

Find the path to a better financial future by contacting The Page Law Firm in Frisco, today! Telephone our offices at 214-618-2101 or contact us online. We can be strong allies in your fight with the IRS, but we can only help if we hear from you today!