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Can you file bankruptcy on taxes owed? Can the amount owed to the IRS be erased if filing for bankruptcy?
— Arthur
Yes, bankruptcy may be of help if you owe past-due federal taxes. But first, before you go down that road, you may want to see if you can work out a payment plan with the IRS or make an offer in compromise. The offer in compromise is where you offer a reduced amount to the IRS to settle your debt. The IRS is very helpful in assisting taxpayers who are unable to pay and will do everything it can to resolve the matter with you.

Uncle Sam wants you to pay your taxes

An offer in compromise may be a legitimate option if you can’t pay your full tax liability, or if doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances: Ability to pay. Income. Expenses. Asset equity. Source: IRS Chapter 13 is the most common type of bankruptcy for individuals. Here is what you need to know if that is where you are headed: All required tax returns must be filed for tax periods ending within four years of your bankruptcy filing. Unless you get an extension, you must continue to file all required returns during the bankruptcy. You should pay all current taxes as they come due during the bankruptcy. According to the IRS, if you do not adhere to the above requirements, your case may end up being dismissed. Thanks for the great question and all the best to you in resolving this matter.

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To ask a question on Tax Talk, go to the “Ask the Experts” page and select “Taxes” as the topic. Read more columns. 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. Taxpayers should seek professional advice based on their particular circumstances. Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by . Related Links: Get disaster relief from the IRS Related Articles:

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