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What Type of Tax Debt Is Dischargeable?

If you owe money to the IRS, you’re not alone. More than 858,000 American taxpayers had tax debt in 2017 alone. Thankfully, income tax debt is dischargeable in Chapter 7 bankruptcy if specific requirements are met. The Los Angeles bankruptcy attorneys at Wadhwani & Shanfeld describe what types of tax debt is dischargeable below.

What Type of Tax Debt Can Be Discharged Through Bankruptcy?

Unfortunately, in most circumstances, only income tax debt is dischargeable through bankruptcy. If you owe the IRS due to fraud penalties or payroll tax penalties, it won’t be dischargeable through bankruptcy. If you owe income tax to the IRS, but your payment is more than two years overdue, it won’t qualify. There are cases when a person failed to file their taxes, and the IRS filed a return on their behalf—if this is the case, the tax debt won’t be dischargeable through bankruptcy.

Below, you’ll find other tax debts that aren’t dischargeable in Chapter 7 bankruptcy:

  • Employment Tax Penalties: Whether it’s excise taxes or customs duties, not all taxes will be dischargeable through Chapter 7 bankruptcy.
  • Third-party Taxes: If the taxes you owe need to be collected by a third-party, it won’t be dischargeable. Examples of third-party collectors include Medicare, FICA, and other government units.
  • Recent Property Taxes: If you have incurred property tax, it won’t be dischargeable if you file for bankruptcy. However, they may be discharged if the property taxes are more than one year overdue.
  • Tax Liens: Secured taxes are not dischargeable and will remain attached to your property.

Experienced Southern California Bankruptcy Attorneys

If you have tax debt that you’re trying to get discharged through bankruptcy, you should have your case reviewed by an experienced attorney. It can be complicated to identify which of your debts can be discharged through bankruptcy, and what chapter is best for you. If you need legal guidance, our Los Angeles bankruptcy lawyers are here to help you. With over 65 years of combined experience, we have helped mover 20,000 people obtain financial freedom. Let our legal team use their knowledge and experience to help you achieve your desired outcome.

Contact our Southern California bankruptcy lawyers today at (800) 996-9932 to schedule a consultation!

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