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Chapter 13 and Old Tax Debt

Do you have outstanding tax debt that has not been paid to the IRS? Bankruptcy can help you deal with IRS tax debt in a manageable method. Last week, we explored dealing with recent tax debt in bankruptcy (  Today, we can take a look at how to deal with old tax debt that is 3 years or older.  First, we need to define what we mean when we say IRS or state tax debt that is 3 years or older.  When referring to old tax debt, a bankruptcy can discharge tax debt that was filed 3 years ago or more than 3 years ago.  The one factor that will be considered is if the tax debt was calculated via tax filing or if it was instated through an IRS or state tax evaluation, meaning that if you calculated the tax debt and filed it 3 or more years ago, in most situations, you should be able to discharge this debt in a Chapter 7 bankruptcy.

What does it mean when tax debt is actually discharged in a bankruptcy?  If you get IRS debt or State tax debt discharged in a bankruptcy, this means that the IRS or State cannot use collections activities to get to your bank account, wages, or assets to pay off the debt that you owe to them.  Once the debt is discharged in a bankruptcy, the government organizations are not allowed to move forward with any collections activities.  Without a bankruptcy the IRS can garnish wages or collect in other ways even without a judgment in court.  There is one way they can still collect from you which need to be noted here.  If you have any return coming from either the State or IRS, they can withhold your return to pay off debt that is owed to them instead of collecting from you, but you can adjust your tax withholding status in the future to avoid this.

What if you don’t know what taxes you owe?  If you have no idea what amount the IRS is pursuing or you don’t know what years were filed and what years were owed, you can ask the IRS directly to get your tax debt status.  Contact the IRS by phone and ask for a transcript of your tax debt.  You can also get your past 5 year transcript from the IRS at this website

File your taxes on time even if you don’t know if you can pay it.  The lesson learned from this article should be that you will have a better chance of dealing with your tax debt in the future if you file it even if you can’t afford the current payment amount.  If you need to utilize a bankruptcy in the future, the option is available to you.  You can check how you would deal with taxes that are too new to be discharged in a bankruptcy or if you did not file them on time in this article

Good luck in Tax Season 2014!




Bankruptcy Law Professionals is a law firm based in Southern California with offices in Riverside for Inland Empire and Santa Ana for Orange County.  We also provide phone consultations for any other locations in Southern California.  Please contact us to schedule a consultation at (855) 257-7671.  We look forward to working with you.


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