Tax Debt Seattle
I can help you with your tax problems. I have the background and experience to help you negotiate directly with the IRS or to discharge your taxes in a bankruptcy. This gives you a wide variety of options that allow you to make a sensible financial decision to end the stress of tax debt.
Ignoring tax debt because you feel hopeless or hope that it will go away only means that you will experience more stress and pay more in interest and penalties. The IRS has up to 10 years to collect back taxes and can garnish your wages, levy your bank accounts, take your government benefits, and auction off your property. Interest and penalties mean that the longer you wait, the more you will have to pay. The IRS is the most powerful creditor in the United States. I can protect you from them.
You have two options for taking care of a tax debt: 1) tax resolution, or 2) bankruptcy. As a bankruptcy attorney and a tax attorney, I can help you find the least expensive and most effective solution to your tax problems. For many of my clients, the best solution is a combination of tax resolution and bankruptcy. Combining bankruptcy and tax resolution allows you to not only take care of your tax debts but also take care of any other debts that are preventing you from achieving financial stability.
Taxes in Bankruptcy
Bankruptcy is one solution to your tax problems. Certain taxes can be discharged in bankruptcy. Even if you can’t discharge taxes in bankruptcy, you may still be able to force the IRS to accept a repayment plan that allows you to payback all of your taxes over 3-5 years.
Discharging Taxes In Bankruptcy
Back taxes can be discharged in bankruptcy if the following conditions are met:
- The tax return was due at least 3 years ago, including extensions.
- The tax return was actually filed at least 2 years ago.
- The tax was assessed within the 240 days prior to filing bankruptcy.
- No offer in compromise was pending or in effect in the 270 days prior to filing bankruptcy.
- The tax is not a trust fund tax, such as 941 employee withholding taxes.
As you can see, taxes can be discharged but you have to expose yourself to IRS collection efforts for a period of up to three years. Additionally, you cannot use an offer in compromise to stall the IRS until the taxes become dischargeable in bankruptcy.
There are two major considerations before you use bankruptcy to discharge your tax debt: 1) can you wait out the three year period, and 2) does bankruptcy make sense for you. In some cases, it is not possible for wait out the three year period or there are other reasons that filing bankruptcy might not make sense. If you cannot discharge all of your taxes in bankruptcy, then you should consider either 1) using bankruptcy to repay your taxes, or 2) tax resolution.
Repaying Taxes In Bankruptcy
Even if you cannot discharge all of your taxes in bankruptcy, bankruptcy may still be a good option for you. This is particularly true if you have other debts in addition to your tax debt. A chapter 13 bankruptcy allows you to force the IRS to accept a payment plan and allows you to discharge your other debts. Here are a few factors that go into deciding if repaying taxes in bankruptcy is the right decision for your case.
- If the IRS has not filed a Notice of Federal Tax Lien, you only have to repay the non-dischargeable taxes. If a tax debt is dischargeable in a chapter 7, then it does not have to be repaid in a chapter 7. This means that you can force the IRS to accept a partial payment plan through the chapter 13 process.
- Non-dischargeable taxes must be paid in full at the IRS rate of interest. However, penalties stop accruing on the date the petition is filed.
- Non-dischargeable taxes are “priority unsecured debts.” This means that you have to repay the non-dischargeable taxes in full; but it also means that you can repay the non-dischargeable debts to the exclusion of other dischargeable debts. In other words, the IRS gets paid first and your general unsecured creditors have to accept whatever is left over after the IRS is paid.
- You don’t have to go through the IRS negotiation process. Your plan payment is based on your income minus your allowable expenses. If that payment is sufficient to pay the tax debt and meet the other requirements for a chapter 13 plan, then the court will confirm the plan. If you setup a 60 month plan, the IRS has to accept payments over 60 months; they don’t get to ask for a shorter plan.
Bankruptcy may not be the best solution if the IRS has filed a Notice of Federal Tax Lien, your total unsecured debts exceeds the chapter 13 debt limits, or you have insufficient income to fund a chapter 13 plan.
If bankruptcy will not work in your case or if you do not want to file bankruptcy, then you can use a tax resolution option.
Tax Resolution – The Alternative To Bankruptcy
You do not have to file bankruptcy to take care of your taxes. Tax resolution allows you to negotiate directly with the IRS. Tax resolution is a good option if you do not qualify for bankruptcy, bankruptcy will not work in your case, or you do not want to file bankruptcy.
I have an entire website devoted to tax resolution. This is just a brief overview of your tax resolution options. For more detail you can check out my Tax Attorney Seattle website.
Additionally, all of these options – except for the offer in compromise – allow you to buy time with the IRS until a debt becomes dischargeable in bankruptcy. In other words, you can prevent the IRS from garnishing, levying, or seizing property by using a tax resolution option; and then, when the taxes become dischargeable in bankruptcy, you can file bankruptcy to wipe out the tax debts.
- Offer in Compromise – This allows you to settle your tax debts for less than the full balance due. This is a good option if you have amount of back taxes that you cannot repay. If you meet the standards for an offer in compromise, you can take care of your entire tax debt for a fraction of the balance due within 24 months.
- Partial Payment Installment Agreement – If you do not qualify for an offer in compromise but cannot repay the back taxes in full, then a partial payment installment agreement may work for you. A partial payment installment agreement allows you to make monthly payments to the IRS during the remaining collection period. At the end of the collection period, the unpaid balance is forgiven.
You can file bankruptcy anytime during a partial payment installment agreement’s application process or during the term of the agreement, without it affecting your right to a bankruptcy discharge.
- Installment Agreement – The installment agreement is a full pay option. This is the most common arrangement. Using an installment agreement is an effective way to get control of your tax debt and prevent the IRS from taking aggressive collection actions such as garnishment, levy, or property seizure.
You can file bankruptcy anytime during an installment agreement’s application process or during the term of the agreement, without it affecting your right to a bankruptcy discharge.
- Innocent Spouse Relief – If your spouse or ex-spouse is the reason you have back taxes, then you may qualify for innocent spouse relief. When you file a joint return, you are jointly and severally liable for your taxes and your spouse’s taxes. This means that if your spouse was hiding income, under-withholding, or failed to pay taxes, then the IRS can collect from you. Innocent spouse relief allows you to avoid liability for your spouse’ taxes by demonstrating that you did not participate in and do not have knowledge of your spouse’s failure to comply with the tax laws.
- Dispute The Amount Due – If the IRS claims that you owe more taxes than you really do, then you can formally dispute the tax liability. Disputing the tax debt successfully wipes out the principal, interest, and penalties. This allows you to avoid filing bankruptcy because of a tax debt and to avoid making payments to the IRS.
One important caveat, don’t dispute a tax debt unless you have good grounds for your dispute. A frivolous tax dispute results in increased interest and penalties and you could be forced to pay additional fines and penalties for initiating a frivolous dispute.
If you owe back taxes, I am here for you. I can offer you a wide variety of bankruptcy and tax resolution options suited to your specific situation. The sooner you get tax help, the sooner you will get rid of the stress and financial uncertainty that comes from owing money to the IRS.