Deciding to file bankruptcy can affect the way you pay your taxes before filing. Here are a few tips you can use to help you with tax preparation and payments, so that all steps you take are legal and don't have any negative impact on your bankruptcy petition.
Paying Taxes Prior To Filing
If you owe taxes that are considered non-dischargeable, you should consider selling nonexempt property and paying off your tax debts before filing bankruptcy If part of the your taxes due are dischargeable, you can force the IRS to to apply those payments to the non-dischargeable part. However, you do lose this option once you file for bankruptcy.
One thing to keep in mind is that sometimes paying large debts, even tax debts, shortly before filing bankruptcy can get you into trouble. So, don't pay any taxes with first consulting an attorney. You may have a better chance of passing the means test if you priority taxes are unpaid at the time you file.
Using The Statute Of Limitations
Just like other types of debts, there is a statute of limitations on tax debt. Generally, if more than ten years go by before your taxes are assessed, the taxes vanish, even without filing bankruptcy. However, in most cases taxes are assessed shortly after you file your return, and there are certain factors that extend or suspend the statue of limitations.
If the terms of an installment agreement with the IRS expires less than a year before the ten-year statute of limitations, the IRS can insist that you extend the installments for another five years. In this case, you may be better off to put off the IRS until the limitations expire, so you'll be home free.
Addressing Other Than Income Taxes
As a rule, if you taxes are not income taxes, they are dischargeable in Chapter 7 or Chapter 13 bankruptcy, if whatever led to the tax liability occurred more than three years before the date you filed. However, there is one exception: trust fund taxes.
Trust fund taxes are required to be withheld by your employer and turned over to the government on a regular basis. If these taxes aren't paid, the government can go after the company and its owners as well as the employees who were responsible for not paying the funds to the government and intentionally failed to do so. These taxes are not dischargeable in any type of bankruptcy, unless they are barred due to the statute of limitations. These taxes are priority debts that you have to pay in full when you file Chapter 13.
If you have tax questions before filing bankruptcy, it might be a good idea to talk with a tax preparation accountant and/or a bankruptcy attorney to get an idea where you stand on your tax debts, and how to proceed before filing a bankruptcy petition.
For more information about tax preparation, contact an accountant like Jeff Baker & Associates, PS.Share