West Palm Beach Taxes & Bankruptcy Attorney
If you are facing large amounts of debt and are facing the possibility of filing for bankruptcy, it’s important to know how filing for bankruptcy will affect your tax burden. Similarly, you may be wondering whether you can discharge a tax burden by filing for bankruptcy. At the law office of Bruce S. Rosenwater & Associates, P.A., our experienced West Palm Beach taxes & bankruptcy attorneys can help you to understand what you need to know about the relationship between bankruptcy and taxes, as well as advise you of your options.
Will I Be Able to Discharge My Tax Burden if I File for Bankruptcy?
If you have a large tax burden that you are hoping to discharge by filing for bankruptcy, think again – under the various chapters of bankruptcy filings, tax debts are considered priority debts. This means that taxes are one of the first debts that will be paid, regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy. There are some circumstances in which a tax debt is dischargeable – consult with your attorney to learn more about whether or not your situation is applicable to this.
Will I Owe Taxes on the Debts that Are Discharged?
Not only will you need to consider how you will account for tax debts that you already have, but you’ll also need to consider how filing for bankruptcy will affect your future tax burden. The IRS requires that you pay your taxes on any debt that is canceled, forgiven, or discharged – you must count the discharged debt as part of your gross income, thereby paying taxes on that income unless you qualify for an exception. Fortunately, debt canceled in a bankruptcy case is typically one of the exceptions.
Reminders from the IRS About Bankruptcy and Taxes
In addition to the above, it’s important to also reference the IRS in terms of knowing how to approach your taxes before, during, or after a bankruptcy hearing. The IRS reminds that:
- You have to file tax returns for tax periods ending within four years of your bankruptcy filing;
- You must continue filing your taxes during your bankruptcy filing;
- If you fail to file your tax returns or pay current taxes during your bankruptcy case, your case may be dismissed.
Further, you should always consult with a bankruptcy attorney if you are filing for bankruptcy, and your attorney can assist you in navigating taxes. Make sure that your attorney has access to all of your tax records, and be honest with your attorney about your tax debts and whether or not you are up-to-date on filing.
Call Our West Palm Beach Bankruptcy Attorneys Today
We understand that filing for bankruptcy is confusing, and can be a very hard decision to make. What’s more, understanding how bankruptcy and taxes interact with one another can be overwhelming. At the law office of Bruce S. Rosenwater & Associates, P.A., our experienced bankruptcy lawyers want to help. To learn more about your options for financial relief, please call us directly or send us a message telling us more about