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Should you consider bankruptcy for outstanding tax debt?

Though the tax season has officially come to an end, you and many other individuals may still have tax-related worries on your mind. In particular, if you owe taxes this year or still owe from previous years, you may constantly worry about the tax debt you have accrued and your inability to pay the balances.

You are not alone in facing this type of ordeal, even though it may certainly seem that way. Numerous others are also facing this predicament, and you do have options for seeking help. In some cases, filing for bankruptcy may act as a viable way to handle your outstanding tax debt.

Stipulations apply

Before you believe that bankruptcy is the answer to all of your financial worries, you may want to remember that not all debts are dischargeable, or forgiven, during bankruptcy, and that includes certain types of tax-related debt. Some tax debts that you cannot discharge during bankruptcy include the following:

  • Trust fund taxes that you are responsible for paying
  • Taxes that you intentionally tried to avoid paying
  • Taxes related to a late return that you filed within two years of your bankruptcy filing
  • Taxes for which you did not file a return
  • Taxes relating to a fraudulent return

Of course, this list does not include every type of tax debt of which bankruptcy may not relieve you.

Dischargeable tax debt

Still, you should not feel discouraged. Your circumstances may not fit any of the aforementioned stipulations, and you could have your tax debt discharged through bankruptcy if the following details apply:

  • Tax debt related to a tax return filed at least two years prior to filing for bankruptcy
  • Tax debt related to a return due at least three years prior to your bankruptcy filing
  • Taxes related to a genuine and necessary tax return
  • Tax debt assessed at least 240 days before your bankruptcy filing

Again, other terms may apply as to whether bankruptcy will discharge your tax debt. Understandably, you may still feel uncertain in regard to whether this debt relief route could suit your particular circumstances. Fortunately, you have the option of speaking with a Florida attorney who understands this legal process and who could answer any questions you may have. If you determine that bankruptcy is a viable option for you, your legal counsel could help you every step of the way toward debt relief.

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