DISCHARGING TAXES IN BANKRUPTCY AFTER REFORM

    • Knowing the rules of tax discharge in bankruptcy gives an attorney an advantage when negotiating with the IRS.
    • One of the criteria in the IRS employee manual when considering an OIC is “To Determine What The Effects Of Bankruptcy Would Be In Analyzing The Settlement Potential.”
    • Numerous OIC’s Have Settled solely on the Threat of Bankruptcy.


 

REQUIREMENTS TO DISCHARGE TAXES IN CHAPTER 7

TAX MUST BE OVER 3 YEARS OLD FROM WHEN THE RETURN FIRST CAME DUE.

TRAP: Make sure the client did not file a REQUEST FOR EXTENSION.

TWO YEARS SINCE THE TAX RETURN WAS FILED.

TRAP: If the IRS filed a “substitute for Return” (SFR)

This does NOT constitute the filing of a return and te taxes will not be discharged.

240 DAYS SINCE THE TAX WAS ASSESSED.

When a return is filed, the IRS assesses the tax within a short time. (could be days or months)

TOLLING PERIODS

  • IF THE IRS WAS PREVENTED FROM COLLECTION BY A REQUEST FOR A HEARING OR APPEAL, THEN THE TIME PERIODS ARE EXTENDED BY THAT TIME, PLUS 90 DAYS.
  • IF AN OIC WAS FILED, THE TIME OF THE OIC, PLUS 30 DAYS.
  • ANY PERIOD OF A BANKRUPTCY STAY, PLUS 90 DAYS.

 

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