No Matter the Circumstances, Wink & Wink’s Denver Bankruptcy Attorneys are Here for You
Now that 2023 is here, there are many reasons to celebrate the turn of the year. However, April looming just ahead may be putting a damper on your optimism if you have tax debt. As taxes come due, many of our clients ask us questions about how a Denver bankruptcy attorney can help with tax resolution.
Depending on your specific circumstances, bankruptcy can resolve tax debt, and in other cases, alternatives exist, such as making an “offer in compromise” to pay a smaller lump-sum than you owe, much like in a debt settlement case.
Fortunately, with debt settlement attorneys from Wink & Wink on your side (who also happen to specialize in bankruptcy for individuals, couples, and businesses) you can get a better understanding of the dearth of legal information about tax resolution and receive accurate advice and counsel to ensure you get the best possible outcome.
When Can Bankruptcy Assist Me with Tax Resolution?
Much like any other private creditor, the IRS can seek a levy or wage garnishment against you to collect the taxes you owe. The IRS is aggressive in their pursuit of back taxes, so this is a scenario you should try to avoid.
When you work with Wink & Wink’s team of bankruptcy attorneys for a debt settlement resolution through Chapter 7 or 13 bankruptcy or any of our debt settlement solutions, we will make sure that you’re on track to benefit from the most cost-effective plan. When you file bankruptcy, you are protected from collection attempts by all creditors including the taxing authorities by virtue of the automatic stay. This part of bankruptcy law stops the IRS and all creditors from garnishing your wages or putting a levy on your property when you file bankruptcy.
Your income tax debt can be discharged through Chapter 7 bankruptcy, but keep in mind that you must meet certain requirements:
- Was the tax debt from at least three years ago?
- Have you filed tax returns in the last two years?
- Has the IRS reassessed your tax liability more than 240 days ago?
If you can answer yes to each of these questions, you may be eligible for a Chapter 7 discharge of your tax debt. Also note that you must not have been convicted of tax fraud or tax evasion to benefit from this strategy.
How Chapter 13 Bankruptcy Can Help Resolve Your Tax Debt
Like Chapter 7 bankruptcy, you can discharge certain tax debt in Chapter 13 bankruptcy. However, you generally have to pay certain income taxes through Chapter 13’s three- to five-year repayment plan.
These taxes are so-called “priority debts” in bankruptcy, which essentially overlap with debts that are not discharged in bankruptcy. In general, priority tax debt cannot be wiped out through bankruptcy and must be repaid in Chapter 13 bankruptcy. In particular, priority debt includes income taxes from tax years that have come due in the three years before you file for bankruptcy and those which have been assessed in the 240 days prior to filing bankruptcy. Priority debt also includes property taxes from the most recent year before filing and payroll taxes. Payroll taxes are generally owed by an employer but can be assessed to the company’s owner. If the owner is assessed payroll taxes prior to filing bankruptcy, the owner will have to pay these in Chapter 13 and will not get out of them in Chapter 7 bankruptcy.
Importantly, however, there are several types of non-priority debt that can be discharged in bankruptcy such as credit card and medical bill debt.
Non-priority income taxes can also be discharged in bankruptcy. These include income taxes for years that were due more than three years prior to filing bankruptcy for which you actually filed a return at least two years prior to filing bankruptcy, and were not re-assessed by the taxing authority within 240 days of your filing bankruptcy.
It is possible that you must also pay off non-priority debts, depending on your income and assets. This is because bankruptcy is often a legal bargain to get out of debt which can cost you based on your ability to repay. However, tax debt is generally considered non-consumer debt, which can enable you to avoid repaying based on income in Chapter 7 bankruptcy if the majority of your debt is non-consumer debt (ex., majority of your taxes and or business debt).
For Chapter 13 bankruptcy, Wink & Wink can guide you based on your specific situation. Schedule a free consultation with Wink & Wink, and we can make sure our team of debt settlement attorneys can assist you with our expertise and targeted strategies. There will be no need, then, to consider other alternatives, such as potentially misleading terms from a debt consolidation company.
What Should I Do In Cases Where Bankruptcy for Tax Resolution Can’t Help?
In some cases, bankruptcy won’t be able to help you with your tax resolution. When you visit us for a free consultation about tax resolution, we can weigh your options. For example, if you have ever filed a fraudulent return, been convicted of tax evasion, or if the period of time in which you owe taxes was less than three years ago, your taxes will likely not be discharged in bankruptcy.
In a case where bankruptcy would not be of help, Wink & Wink can assist you in dealing directly with the IRS through one or more of the following options:
- First, secure a release from garnishment or levy. Wink & Wink’s Denver bankruptcy attorneys can assist you in this process, as well as help you develop a strategy for how to proceed with the IRS.
- Once you’ve received this release, you may be able to file for Currently Not Collectible status. In this case, your account is moved out of collections and takes on a status that protects you from collection because of your financial hardship. If you can remain in this hardship status long enough, the collection statute of limitations will pass, and your tax debt will become permanently uncollectible.
- Another option is a payment plan in which you pay back the tax debt in installments. You would only take this approach if your income and or assets are such that you can repay your taxes. Keep in mind, however, that interest will be involved, and this may not make sense in the long run when there are other options that Wink & Wink can provide as knowledgeable debt settlement attorneys.
An Offer in Compromise is another option that Wink & Wink can help leverage for you. The Offer in Compromise process is like bankruptcy in that it looks at your assets and income to determine your ability to repay the taxes. If you make too much or own too much, it likely is not your best option for tax resolution. However, the Offer in Compromise does not look at some of the factors for discharging taxes in bankruptcy. If you have income taxes for tax years that came due in the past three years or are from returns that were filed in the past two years, an Offer in Compromise may be preferable to bankruptcy. In some cases, it can even make sense to pursue relief through both bankruptcy and an Offer in Compromise.
Navigating your tax debt is complicated. Fortunately, the attorneys at Wink & Wink are experts in all the methods of tax resolution and can advise you which path is best for you based on your situation.
Be Wary of Misleading Debt Consolidation Companies for Tax Resolution
Be sure you understand what debt consolidation can do – and what it can’t. Debt consolidation companies essentially broker your relationship with a new loan company who will make your payments “more manageable.” While this could in some ways seem ideal because it simplifies the process, you aren’t going to be able to have your tax debt resolved.
Also, tax resolution companies that do not provide representation in bankruptcy or bankruptcy attorneys who do not provide direct tax resolution with the IRS cannot advise you on all your options. If you go with such a company to help you, you may be missing the most cost-effective option you have for resolving your taxes. In some cases, this means you’ll have to pay thousands or more than you would have to pay to resolve your taxes.
The Denver bankruptcy attorneys at Wink & Wink are the leading bankruptcy and debt settlement attorneys, and we have the experience and expertise to help you navigate a tax resolution that will be more beneficial than what debt consolidation companies can provide.
How to Get In Touch with Your Denver Bankruptcy Attorneys for Tax Resolution Assistance
You are only a contact form or phone call away from scheduling a free consultation with us. During this consultation, we will take a look at your tax history and your specific debt situation to make individualized, informed recommendations about the legal strategy you should pursue.
Tax resolution with a bankruptcy and debt settlement attorney isn’t a one-size-fits-all solution. We can make sure that your specific case gets looked at with the utmost care, so that you can get back up on your feet and make 2023 a year for change.