- Income TaxThe IRS has strict limits on which taxes can be eliminated in bankruptcy. First, tax debt is typically only discharged in Chapter 7 bankruptcy. If you file Chapter 13 bankruptcy, you’ll likely end up paying some or all your tax debt. Second, you can only typically discharge income taxes. If you owe any other type of tax, like payroll tax or self-employment tax, you cannot discharge it in almost all cases. Third, you must not have committed fraud on the tax you owe. For example, if you filed a tax return using the wrong Social Security number on purpose, you almost always can’t discharge the tax you owe. Finally, the taxes to be eliminated in bankruptcy generally must have been “due and owing” for more than three years before you file for bankruptcy.
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