The worldwide pandemic affected more than just our health. In 2020, the Internal Revenue Service (IRS) pushed back the filing deadline for personal tax returns to July 15. In 2021, the deadline was again pushed back, to May 17. This year, no such luck! April 18, 2022 is this year's deadline for filing personal income tax returns. What are your options if you are in a tight financial bind this year and owe income tax?
If you have a prior-year tax debt with the IRS (think 3 years or older), you may be able to discharge that income tax debt through Chapter 7 bankruptcy handled by a capable, experienced bankruptcy attorney. Certain prohibitions and conditions apply (think tax returns filed on time), so do not view this as a go-to way to get out from under a tax bill. Still, when you team up with a bankruptcy attorney, you can relieve some of that nagging worry.
Highlights of restrictions include:
- Having tax debt based on a return due at least three years before your bankruptcy filing
- Filing the tax return at least two years before filing for bankruptcy — which means this year's return will not qualify, but action now can help with past tax bills
- An IRS assessment for the debt at least 240 days before your bankruptcy filing — If you received that dreaded notice by Saturday, August 21 of 2021, a bankruptcy filed April 18, 2022 can protect you
- No malice or willful intent to deceive or evade the IRS — Your tax bill must be due to a sincere oversight or error
Stop the Clock
The IRS is always first in line in collecting debts, and the agency needs no lawsuit in order to begin levying fines or garnishing wages. When you file for personal bankruptcy, however, you can at least stop IRS actions against you. That doesn't mean that the tax debt is gone, but you can get some relief.
You may still owe the debt, but with the additional time the bankruptcy filing gives you, you and your bankruptcy attorney can fashion an IRS repayment plan.
On an emotional level, you may feel a bit of satisfaction in knowing you have (at least momentarily) defanged the IRS.
On a financial level, bankruptcy gives you time to catch up on your obligations and arrange future finances to pay down the tax debt.
We all understand the positive energy behind Carpe Diem, or Seize the Day. It's an inspiring message to enjoy the gift that is each day under a bright Texas sun.
Apparently the IRS gets inspired by Carpe Pecuniam, or Seize the Money. With only 30 days' notice, the IRS can garnish your paycheck for tax debt.
The IRS can also seize property to settle the debt. It needs no lawsuit, but it must follow procedures that include a notice of its intent to garnish your wages or seize your bank accounts. No need to hustle down to a courtroom, but then again, who enjoys getting a letter from the IRS? And when that letter tells you the IRS will skim off a noticeable portion of each paycheck or taake all of the money in your bank accounts, you cannot ignore the warning.
Bankruptcy may not get you out from under your tax debt, but it can stop IRS wage garnishment when handled by a Texas bankruptcy attorney. The automatic stay generated by your bankruptcy filing will stop wage garnishment.
Not sure if bankruptcy is for you, or if bankruptcy is the best method of dealing with tax debt? Turn to a capable, compassionate bankruptcy attorney who can answer your questions. Your bankruptcy attorney will gladly shoulder some of your burden, help you to get out from under the IRS's watchful eye, and put you on a path to a stronger, firmer financial future.
Filing for bankruptcy is one wise strategy for stopping pressure from the IRS. When you contact us at The Page Law Firm today, we can help halt IRS actions and give you the breathing room you need to restructure your debt. Schedule your complimentary 40 minute strategy session by calling 214-618-2101.
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