Tax Debt and Bankruptcy – Ask Bankruptcy Attorney in Sacramento Stockton Fairfield California

Ignoring Your IRS Tax Debt can Result in Tax Levy on Bank Account, Wage Garnishment, and Tax Lien on your Home. Chapter 13 Bankruptcy or Chapter 7 Bankruptcy may be an option.

If you filed an extension for your tax return for 2014, it is due on October 15, 2015.  If you do not file by the due date, you will be assessed additional penalties for late filing on top of the penalties and interest already accrued for not paying your tax debt by April 15.  If you owe taxes to the Internal Revenue Services or the Franchise Tax Board (California State tax), not filing a return will NOT prevent the IRS or FTB collection attempts through wage garnishment, bank levy, or recording a tax lien on your home or real estate.  Not filing is to your disadvantage not only in the penalties for late or non-filing, but also the IRS or FTB usually assesses a higher tax liability than what you really owe.  In other words, the tax collectors overestimate your tax debt.

If you are unable to manage your payment installment with the IRS or FTB, another option is to file for Chapter 13 Bankruptcy so that the tax debt is put under a payment plan for up to 60 months without accumulating more penalties and interests from the IRS or FTB.  In some cases, the tax debt might be dischargeable or eliminated through Bankruptcy so you do not have to repay all your tax debt.  Doing nothing will result in continuing accrual of interests and penalties.  Sometimes, just paying the monthly minimal to the tax collector just barely touch the principal balance because most of the payments goes to the interests and penalties accruing each month.

Click here for a list of reasons why Chapter 13 Bankruptcy might be better in dealing with your tax debt than Chapter 7 Bankruptcy.

However, if your estimated Chapter 13 Bankruptcy Plan payment is too high for your budget, another bankruptcy alternative is Chapter 7 Bankruptcy.

Like Chapter 13 Bankruptcy, Chapter 7 Bankruptcy can also eliminate dischargeable tax debt (see below).  However, if you owe nondischargeable tax debt, bankruptcy can still provide debt relief by eliminating other dischargeable debts like credit cards, medical bills, payday loans, unsecured personal loans and deficiencies from car repossession or foreclosure.  Eliminating other debts will free up additional income to pay the nondischargeable tax debt.

Some tax debts are dischargeable (eliminated) in Chapter 7 Bankruptcy or Chapter 13 Bankruptcy but only if all of the following conditions are met:

1.  The Taxes owed are Income Taxes

2.  The Taxes owed are due at least 3 years before your filed Bankruptcy

3.  You Filed the Taxes at least 2 years before your filed Bankruptcy

4.  Your Tax Debt was Assessed by the IRS or the collecting government agency at least 240 days before your filed Bankruptcy

5.  You did not Commit Fraud or Willful Evasion.

This rule applies to both IRS Tax Debt and Franchise Tax Board Tax Debt.

Click on the following link for further discussion of dischargeable tax debt:  http://www.muoicheabankruptcyattorney.com/relief-from-irs-levy-wage-garnishment-bankruptcy/

Information provided in this website is too general and is inadequate to provide legal advice to specific cases, which are all unique and far too complex to discuss fully here.  For more information on which Tax Debt can be discharged call Muoi Chea, experienced Bankruptcy Attorney with office locations in Sacramento, Stockton, and Fairfield, California.

Before the consultation with a Bankruptcy Attorney it is helpful to obtain an "Account Transcript" for the tax years that you have tax liability.  The Internal Revenue Services and Franchise Tax Board both have offices in Sacramento, California.  Moreover, the Internal Revenue Services have additional offices in Stockton and Modesto, California.  Click on the following link for additional IRS offices:  https://www.irs.gov/uac/Contact-My-Local-Office-in-California

Make sure you have your driver's license and social security card when you go to the IRS or FTB offices whether it is in Sacramento, California, Stockton, CA, Modesto, CA, or other office locations as they need proof of identification in accessing personal information.  If you reside in Roseville, Rocklin, Woodland, Davis, Vacaville, Dixon, Fairfield, Yuba, the nearest IRS Office is in Sacramento, California.