Now that tax season is over, you may find yourself owing the IRS money. Tax debts can be tricky, especially if you lack the funds necessary to repay them. Although many people assume tax debts are not eligible for bankruptcy, the truth is that some tax debts are and can be discharged quite easily.
Tax Debt Eligibility
In order for a tax debt to qualify for a bankruptcy discharge, they must meet certain criteria. First, the tax debt must be an income tax debt that is at least three years old. Also, the debt must have a tax return on file with the IRS at least 2 years prior to the bankruptcy filing. The debts must also have been assessed by the IRS at least 240 days prior to filing. Last, the tax debt must not be tied to any tax fraud or evasion.
Tax debts that do not meet the criteria for bankruptcy may still be able to repaid under one of two programs offered by the IRS. The installment plan allows for debts under $25,000 to be repaid in a series of smaller payments across a one to two year period. The IRS may also accept a tax debt settlement offer, known as an Offer In Compromise, for those who are financially insolvent. If bankruptcy isn’t an option, contact the IRS to discuss tax debt payment options.