Bankruptcy - Reducing Tax Liability through Bankruptcy

The IRS doesn't like to discuss using Bankruptcy as a means of reducing tax liabilities, but in actuality many IRS taxes, penalties and interest do indeed qualify for partial or complete discharge in Bankruptcy. As such, it is advisible to at least be aware of bankruptcy as an option or way to remove your tax debt liability.

To benefit from the Bankruptcy laws and therefore avoid paying income taxes, the taxpayer's income tax liabilities must qualify.
Many taxpayers and bankruptcy attorneys quickly file for bankruptcy without thoroughly understanding whether or not the taxpayer's income tax liabilities qualify for forgiveness and discharge. This has a negative effect, as it generally fails to successfully get all eligible income tax liablities discharge, whereas a thorough understanding of the laws prior to filing would help the taxpayer save money by receiving more forgiveness and discharge.
The most common types of taxes that are eligible for discharge in bankruptcy are old personal (individual) income taxes, although other types of taxes can also be discharged.
Taxes which are not eligible for discharge in bankruptcy include Civil Penalties for payroll taxes.

Centsable Accounting, Inc. tells you when you need to explore issues with a bankruptcy attorney in your area, and helps you select the right attorney. By contacting us first, we can ensure you do not pay for an expensive attorney if you do not need to. Contact us for a free consultation.

> What to Know Before You File For Bankruptcy