"The only difference between death and taxes is that death doesn't get worse every time Congress meets.”
Taxes have been the talk and fascination of many politicians, comedians, actors, business people, and other individuals of every economic class and working background. For some, filing taxes reaps benefits in the form of tax refunds, while others may only feel the relief of abiding by the law while their bank account dwindles to pay their dues. There are many reasons why it may be difficult to pay for taxes since hardships can fall on anyone. Not only that, but some individuals may forget or be unable to lay the proper amount aside to pay their taxes once they are due.
Bankruptcy is not the only answer
Though it may be tempting to immediately jump to bankruptcy, there are many opportunities to settle, litigate, or negotiate the amount due through the use of a competent tax attorney, both in the U.S. Tax Court and within the IRS' own appellate process. Your attorney may have other suggestions for you, but here are some of the most popular options:
- Payment plans (Installment Agreements): According to the IRS, “If you're financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement” [i]. Visit their website to see if you are eligible.
- Offer in Compromise: You may be able to settle your tax debt for less than the full amount that you owe.
Bankruptcy for tax debt relief may be another alternative
If the other options are not available or not the most beneficial to your situation, filing bankruptcy under Chapter 7 or Chapter 13 may be an option. For each Chapter, certain qualifications have to be met. Before you decide on a course of action, or file taxes if you have not done so, it is best to speak to a tax attorney and find out if your situation would be a good fit for bankruptcy or another, more appropriate option. Discharging taxes in bankruptcy is more difficult than it appears, as bankruptcy discharges debt, not liens, and the IRS may have already created statutory liens. In addition, there are various rules, which must be adhered to before a tax liability may be discharged in a bankruptcy proceeding.
Sometimes, bankruptcy may also offer an alternative to installment plans, such that reorganization in the Bankruptcy Court may be more beneficial to the Debtor.
We are here to help
The Kridel Law Group has over 40 years of expert tax and bankruptcy law experience, specializing in tax matters for individual and business needs. Located both in New Jersey and New York, contact one of our offices today for professional advice at (973) 470-0800 or by email at [email protected]