I can’t pay my taxes

Most people think that if you owe income taxes you cannot wipe them out in bankruptcy because they are government debts.  That is not correct, however.

Older taxes can often be wiped out in bankruptcy.  And, for more recent taxes that cannot be wiped out, a Chapter 13 case can generally stop interest and penalties on the balance which can be paid over up to five years.  This means that as you pay the taxes through the Chapter 13 plan, the balance does not continue growing larger – as it would if you were just making direct payments to the Internal Revenue Service (IRS) or California Franchise Tax Board (FTB).

If your wages are being garnished by the IRS or the FTB, usually a Chapter 7 or 13 can stop the garnishment (a Chapter 13 usually offers much better protection in this case).

The rules for determining whether taxes can be wiped out in a bankruptcy are very complicated, but an experienced bankruptcy attorney should be able to calculate this.  Many bankruptcy attorneys do not know this, however, particularly attorneys who say they only file Chapter 7 bankruptcies.  If an attorney tells you that your taxes will be wiped out in a bankruptcy, make sure to ask the attorney how he or she figured that out.  He or she should be able to give you a detailed explanation.  We do that for our clients who have tax debt.

If the IRS or FTB are garnishing your wages call us immediately.  If we can help you by filing a bankruptcy, your garnishment can be stopped right away.  The longer you wait, the longer your wages will be garnished!

Everyone’s situation is different, which is why our office offers a free personal consultation with an attorney. That way we can analyze your situation and advise you of the best way to save your property and protect your income.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Learn more about Tax Debt.

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