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Confused - what IRS debt can be discharged in Ch.7, can anyone help in my situation?

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    Question Confused - what IRS debt can be discharged in Ch.7, can anyone help in my situation?

    I looked online and found that there is quite a bit of criteria that must be met for tax debt to be included in a Chapter 7 and am hoping someone can help me understand if I would be eligible to include mine or not based on my info:

    1. Received IRS form CP2000 on November 9th of 2020 stating I owe 10k (apparently you have to at least wait 240 days from date of notification? Is that true? Would that be 240 days from 11-9-20 for me to file and have it included?)
    2. Discrepancy was for tax year 2018, which I of course filed in 2019 (apparently it has to be at least 3 years later to be included in Chapter 7, but is that 3 years from the tax year or from the year you filed? In my situation would 2021 work or it wouldn't be eligible until 2022?)
    3. Amount 10k - not sure if that matters
    4. I currently have entered a payment plan to pay it back.

    Anyway that's the info on my tax debt and am not sure if I can include that in my Chapter 7 filing or not, which will happen in a few months. If I have to wait 240 days from 11-9-20 I'm not sure if I can make it but maybe I could.

    Help would be appreciated.

    #2
    Generally, to be dischargeable, the IRS tax debt must fit the following 3 rules;
    • for a tax which was last due 3 years (without penalty)
    • and, was NOT assessed within the last 240 days,
    • and, for which the tax return was filed at least 2 years ago
    (all measured from the date of the bankruptcy filing)

    So if you were to file today (February 4, 2021), then you could theoretically discharge tax years before 2016. You would think tax year 2017, but it's based on when the tax was due without penalty. Since 2017 was due by April 15, 2018... then it would not be subject to discharge . That's because it won't be 3 years until April 15, 2021. Additionally, the other two requirements must also be met (not assessed within last 240 days of fling, and that you actually filed a tax return and at least 2 years has elapsed.)

    Now we can address your questions.

    Originally posted by Aidencent55 View Post
    1. Received IRS form CP2000 on November 9th of 2020 stating I owe 10k (apparently you have to at least wait 240 days from date of notification? Is that true? Would that be 240 days from 11-9-20 for me to file and have it included?)
    No, see my response to #2.

    Originally posted by Aidencent55 View Post
    2. Discrepancy was for tax year 2018, which I of course filed in 2019 (apparently it has to be at least 3 years later to be included in Chapter 7, but is that 3 years from the tax year or from the year you filed? In my situation would 2021 work or it wouldn't be eligible until 2022?)
    Tax Year 2018 would not be eligible for discharge unless a bankruptcy was filed after April 15, 2022.

    Originally posted by Aidencent55 View Post
    3. Amount 10k - not sure if that matters
    The amount is irrelevant to the dischargeability.

    Originally posted by Aidencent55 View Post
    4. I currently have entered a payment plan to pay it back.
    An online payment agreement (OPA), spread out over time, is usually the best way to deal with an overdue/unpaid tax.

    The other issue that can arise is whether or not the IRS actually filed a Federal Tax Lien. If they do file for a lien, then it attaches to all your property and it is not dischargeable.

    At least that's my understanding of the process. I was able to discharge some of my taxes. I did not have any Federal Tax Lien(s) recorded. I did not have any tax "assessed" on my tax record. I filed all my returns on time.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.

    Comment


      #3
      You may also want to look into an OIC (Offer in Compromise). Sometimes (in about 45% of requests), IRS can reduce the amount you owe depending on your circumstances. It can be a long process (can take a few months for approval), but it can be done. You would still do a payment arrangement, but you would not owe the whole amount.

      Comment

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