St. Louis Bankruptcy Center

 

Tax Debt and Bankruptcy – How Does it Work?

Taxes, Uncategorized

Learn how bankruptcy affects taxes

As a practicing St. Louis Bankruptcy attorney, I often get questions about taxes. Tax debts can be discharged through bankruptcy, but there are restrictions on the types of tax debt that will be discharged. First, only income tax debt may be discharged in a bankruptcy. There are 3 basic classifications of tax debt when it comes to bankruptcy: 1) secured, 2) priority and 3) general unsecured. The classification of the tax debt will determine whether it can be discharged.

Secured tax debt is a result of a taxing authority (IRS, MO Dept of Rev) filing a tax lien against your property for failure to pay your income tax debt. Whether this tax debt is discharged will depend on several complex factors and would require review from a St. Louis bankruptcy attorney.

Priority income tax debt is non-dischargeable in all situations. A priority tax debt is an income tax that was either 1) due less than 3 years from the date of the St. Louis bankruptcy filing 2) filed less than 2 years from the bankruptcy filing, 2) was assessed less than 240 days from the bankruptcy filing or 3) was filed under fraud. The most common reasons for priority income tax debt (non-dischargeable) are that the taxes were filed to recently or were due less than 3 years from the date of the bankruptcy filing. Priority taxes must be paid in the event of a St. Louis bankruptcy filing.

General unsecured income tax debt can be discharged in consumer bankruptcy filings. General unsecured income tax meets all the requirements stated in the last paragraph. In order to determine whether your tax debt is dischargeable, you should ask for a tax transcript from the taxing authority and present the transcript to a St. Louis bankruptcy attorney.

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