Getting behind on your taxes can be a huge burden. Take the recent case of one California celebrity, Sinbad, who recently filed for Chapter 7 bankruptcy in an attempt to get out from under crushing debts totaling nearly $11 million. Over $8 million of his debt consists of tax obligations. While your back taxes probably don’t reach such jaw-dropping heights, you may still be struggling to keep up with the financial burden that your back taxes have placed on you. With help from a bankruptcy attorney in Moreno Valley CA, you can eliminate or reduce certain types of tax burdens. Here’s how.
Discharging Income Tax Debts
State and federal income tax debts are the easiest type of tax debts to discharge. If you meet the requirements for a Chapter 7 bankruptcy, you can use Chapter 7 to discharge your back income taxes, provided that they come from a return that was due at least three years ago, and that you filed that return at least two years ago. Be sure to bring copies of your tax documents along when you meet with your bankruptcy attorney Moreno Valley CA so that they can accurately assess your eligibility for discharging income tax debts with Chapter 7.
Dealing with Other Tax Debts
Finding relief from tax debts that are not related to income is a bit more difficult. These taxes cannot be discharged completely, but you can put a stop to IRS collection efforts by filing for Chapter 13 bankruptcy. Chapter 13 allows a judge to create a consolidated payment plan for you to use in repaying all your debts over a period of 3 to 5 years. During this period, the IRS will not be able to assess further interest charges or penalties based on your back taxes. They will also be unable to proceed with activities like wage garnishment or property seizures.
Property Taxes
While you can’t discharge property taxes incurred within a year of your bankruptcy filing, older property taxes may be eligible for discharging. However, if you do this most counties will put a lien on your property the next time your property tax comes due. You will have to pay this lien if you ever sell your property. A bankruptcy attorney Moreno Valley CA can tell you more about property taxes as well as answer other bankruptcy-related tax questions.
