Can You File Bankruptcy On IRS Debt?


That depends on if you qualify. If you don’t qualify or realize there is too much down side to filing bankruptcy on your delinquent IRS debt, we have other options for you.

Benefits of Filing Bankruptcy On IRS Tax Debt

Bankruptcy allows you an option to use a different set of laws (bankruptcy laws) to resolve your delinquent IRS tax debts. It takes the process out of the hands of the IRS and into the hands of the bankruptcy courts.

Depending on which bankruptcy program you are approved for, you can either completely discharge your IRS debt or make affordable monthly payments.

Pitfalls

  • Many IRS tax debts are non-dischargeable
  • Bankruptcy will ruin your credit
  • Bankruptcy will make it very difficult to obtain new credit
  • You may be required to forfeit your assets
  • You probably will lose your credit cards
  • Declaring bankruptcy now might make it harder to deal with things in the future if something worse comes along
pitfalls
How To Release An IRS Bank Levy

You Can File Bankruptcy On IRS Debt If:

  • Your due date for filing the tax return was at least 3 years ago
  • Your tax return was filed at least 2 years ago
  • Your tax assessment is at least 240 days old
  • Your tax return was not fraudulent
  • Your returns are filed for the 4 previous years
  • You are not guilty of tax evasion
  • You pass a financial means test
* Other conditions may apply

What Are Your Other Options

You can file bankruptcy on IRS debt, but many times when you file bankruptcy on IRS debt the consequences are greater than what you are willing to accept or your IRS debt doesn’t qualify. If that is the case, you will have to resolve your tax debt using one of the programs the IRS offers. You can learn more about how we can help you resolve your delinquent tax debt with either the Offer In Compromise or the Installment Agreement program.

Additional Information

Do we provide assistance with bankruptcy?

While you can file bankruptcy on IRS debt, bankruptcy is meant to assist with all types of debts, so bankruptcy has a greater scope than just for tax resolution. Since bankruptcy can include other debts outside of your delinquent taxes, this is a solution our program does not support in our software, but we want to make sure you have a general understanding of what bankruptcy entails. After reading about the basic requirements above, if you think you may qualify and you think that bankruptcy would be beneficial, we suggest you contact a bankruptcy attorney in your area to seek advice. If you decide bankruptcy is not for you, then we are here to help you with your tax resolution needs. Read more

More on the pitfalls of bankruptcy

Yes, potentially you can file bankruptcy on IRS debt, but it can come at a heavy price. Not only can bankruptcy negatively affect your credit, it can affect your employment as well. Most people are aware that filing bankruptcy can make it hard to finance cars, houses, etc., but did you know that it can also cause you to have to pay substantially higher interest on any financing you are able to obtain, making renting a home or apartment very difficult, and it can affect your work.

If your work requires you to maintain a professional license (Realtors, Loan Officers, Contractors, etc.) or go through a background check, a bankruptcy can make receiving or renewing a license difficult to impossible and it can prevent you from passing a financial background check.

What if you don’t want to and or can’t qualify for a bankruptcy

The bankruptcy laws state that you can file bankruptcy on IRS debt. However, the reality is that much of IRS tax debt does not qualify for the bankruptcy programs. With bankruptcy being difficult to qualify for, potentially requiring forfeiture of assets, and able to ruin credit, etc., many individuals who owe on back taxes opt to use other resolution methods. Should you decide bankruptcy is not the right solution for you to resolve your back taxes, this is where we can help you.

To discover how our software can help you resolve you taxes for the least amount possible, we encourage you to review more information on both the Offer In Compromise and the affordable Installment Agreement programs and how our software can help you.

Want To See If You Are A Good Candidate For Our Program?

Try our Free Pre-Qualifier and make sure you are a good candidate for our tax resolution program, the Resolution Assistant. It’s FREE and we don’t ask for your credit card, date of birth or social security number. Get started today for Free!

Interest Abatement

Most delinquent taxpayers will not qualify to abate (reduce or remove) their interest under the abatement program.

Abatement of interest is available only:

  • If the IRS is at fault or makes a mistake
  • If interest is charged because of IRS delays
  • If you were living in a disaster area at the time your tax payment was late
  • The IRS does not let you know that you owe more tax

How To Not Pay Interest

In many situations, what Interest Rate Does The IRS Charge is not the most important factor to consider. The simplest way to not to pay interest on your delinquent taxes is to use one of the programs that the IRS offers to resolve your taxes for less the full amount owed. The two most common are the Offer In Compromise and the Installment Agreement program.

Here is an example
Delinquent Taxes Owed: 22,000
Interest: $2,400
Penalties: $5,000
Total Tax Bill: $29,400
   
Approved Repayment Amount: $5,500
 

As you can see from this example, the amount of the approved settlement is less the original delinquent tax amount. Not only does the hypothetical taxpayers not have to pay the full amount of the delinquent taxes, but he/she does not have to pay the interest that was charged as well. While technically they did not qualify for an interest abatement, they were still able to settle their back taxes without having to pay any interest.

This is a technique that can potentially work for you. In order to find out if you qualify to use this repayment program, you must apply the IRS’ repayment formulas to your current financial situation. Only after you have completed this step will you be able to understand which repayment program will work best for your specific situation and for how much you will be able to settle your delinquent tax debt.

To find out more on how our program can help you determine your eligibility and repayment amount we encourage to start with our Pre-Qualifier. It’s FREE and we don’t ask for your credit card, date of birth or social security number.

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