Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

Yes, New Yorkers, Some Income Tax Debt Can Be Discharged in Chapters 7

One creditor that can cause more hassles in a Chapter 7 New York bankruptcy than others is the government, specifically the IRS, New York’s Department of Taxation and Finance, or municipal revenue agencies. The bankruptcy code is kinder to the IRS than other creditors, but while tax debts generally receive “priorities” in bankruptcy—meaning they can’t be discharged and must be repaid—there are conditions in which the bankruptcy code allows a discharge.

Debts to the IRS must meet five criteria:

(1) The debt must be at least three years older than the tax deadline of the year it was due, including extensions.

(2) Petitioners must have filed a tax return including that debt more than two years before filing bankruptcy. If they’ve filed more recently, they will be denied a discharge.

(3) The petitioner must have filed a non-fraudulent tax return the year the debt was due.

(4) The IRS must assess the tax at least 240 days before the petitioner files bankruptcy.

(5) The petitioner is not guilty of tax evasion.

After their bankruptcy cases begin, petitioners must then prove that they filed income tax returns for the previous four years before the 341 meeting with the creditors. If creditors request it, petitioners will have to file the returns with the bankruptcy court and provide them to other creditors or the Trustee if requested.

The critical issue is point three, that the petitioner must have filed a tax return with the debt. The reason is that the IRS will assess tax on unfiled returns, meaning petitioners can’t simply decline to file a return. Rather, they must file a return and not pay the full amount. Consequently, finding oneself in the circumstances that allow a discharge of a tax debt can be quite difficult to meet. Obviously, the government will do everything it can to collect its revenue. This is why hiring an experienced New York bankruptcy attorney is important to handling a Chapter 7 bankruptcy.

For more questions about tax debt, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced chapter 7 bankruptcy lawyer Brooklyn NY Bruce Weiner for a free initial consultation.

 

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Beware Grace Periods, Debtors

Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them

Read More »

Bankruptcy May Not Rescue You From Vicious Personal Disputes

Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy.

Read More »

Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.” Although many bankruptcy lawyers

Read More »

6 Steps to Take Before Filing Bankruptcy

Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result.

Read More »

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »
Scroll to Top