Will Bankruptcy get Rid of my Tax Debt?
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Will Bankruptcy get Rid of my Tax Debt?

Question Detail: I owe over $10,000 in back taxes. If I file for bankruptcy, will those debts be excused? I accumulated the tax debt because I own my own business, but my son had several expensive medical problems over the last few years, and I couldn’t afford to pay my taxes. I need to get rid of these debts. If I can’t file for bankruptcy to eliminate my tax debt, can I take out a personal loan to pay off my taxes and then file bankruptcy to eliminate that loan?
Answer: Some taxes are dischargeable in bankruptcy, but it depends on a number of things. First, what type of tax is it? For example, payroll taxes or trust fund taxes (taxes that you as an employer are supposed to withhold from employees paychecks) are not dischargeable. Personal liability attaches to the principal of the business who was a ‘responsible party’ for making sure the payroll taxes were paid. Income taxes, on the other hand, are dischargeable if certain conditions are met: 1) The unpaid income taxes are for a tax year more than 3 years ago. 2) A tax return was filed at least 2 years before filing bankruptcy. 3) The taxpayer did not try to evade or defeat the tax (usually fraud is involved with this last condition). If these conditions are satisfied, then the back taxes are dischargeable in bankruptcy. If not, don’t worry. Other strategies can be employed. A good tax resolution attorney can help solve the tax problem. Many firms advertise nationally, but you would be better served if you found a local tax resolution attorney, an attorney you can actually talk to on the phone and meet in person. Often, a combination of bankruptcy and tax resolution can be used to solve the problem you are dealing with. This is a complex area in bankruptcy where an experienced attorney can save you thousands. Have a question about bankruptcy in Utah? Craig Swapp & Associates would be happy to answer it. Please submit your question online and we’ll respond as soon as possible.

 

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