Chapter 7 and Federal Taxes

[biotechsolution]

You're best bet is to contact the IRS agent who handled your bankruptcy case and see for what amount he'll settle with you to release the liens.

BUT first wait until after your discharge, you may get lucky and the IRS may generate a automatic lien release.

But HHM is right, there are pretty no exempt assets when it comes to the IRS but since you don't have any real exemptions (homestead) it may not take much to have them release the lien.

HOWEVER, the other thing that isn't exempt from the IRS is your 401k, it you have money in that expect the IRS to levy it for your taxes.
There is plenty of case law on it and they win every time.

what happens is 'your' aren't responsible for the tax debt after discharge..but everything you had at the time of filing is responsible, including your 401k.

[HHM]

I have a few questions about the response to this post. You mentioned that the lien the dischargeable taxes "dies" in the BK case. Does this mean I do not have to file a quasi lien strip or that motion to value the lien that you mentioned in your previous posting? If it dies, am I not personally responsible for the debt and it no longer attaches to anything?

My situation:

I filed a no-asset case on 10/30/2009.

I owe $47,000 for back IRS income taxes between 2002-2008. About $30,000 of that is dischargeable because those years we filed over 3 yrs ago.

I have liens on all years when the IRS placed it in uncollectable status

I have a house but I am upside down in it and owe more than it is worth.

I am trying to research all my options to make sure I don't end up in a situation when I am discharged but "still owe " and have personal liability

Thanks

You will need to address this with your attorney. Being a no asset case is not good enough vis-a-vis IRS taxes, bankruptcy exemptions do not apply to tax debt. So, you may be a no-asset case for purposes of BK, but still have "assets" for purposes of the tax lien. Thus, usually, you would likely still need/want to do a Motion to Value and strip as appropriate even for the lien associated with dischargeable tax debt.

[cinderella]

Tax lien, quasi lien strip question

I have a few questions about the response to this post. You mentioned that the lien the dischargeable taxes "dies" in the BK case. Does this mean I do not have to file a quasi lien strip or that motion to value the lien that you mentioned in your previous posting? If it dies, am I not personally responsible for the debt and it no longer attaches to anything?

My situation:

I filed a no-asset case on 10/30/2009.

I owe $47,000 for back IRS income taxes between 2002-2008. About $30,000 of that is dischargeable because those years we filed over 3 yrs ago.

I have liens on all years when the IRS placed it in uncollectable status

I have a house but I am upside down in it and owe more than it is worth.

I am trying to research all my options to make sure I don't end up in a situation when I am discharged but "still owe " and have personal liability

Thanks

In Bankruptcy, if the underlying taxes are dischargeable, then the lien dies with the bankruptcy, meaning, the lien cannot attach to any property that is acquired after the Bankruptcy. But, the lien still attaches to any property of the BK estate. If the taxes are non-dischargeable, the lien survives and can attach to newly acquire property.

[HHM]

Hello,

I am new to the BKfourm. I am going to file a Chapter 7 Pro Se (Using Nolo Book and internet resources), within the next 7-10 days and had a big question on taxes.

For the past (3) tax years I have not been required by the IRS to file taxes because I did not make enough money. My guess is that I provide an affidavit stating this?
Will the Trustee accept this? Are there any "potholes" to avoid with this situation?

Thanks.

An affidavit to that effect should be sufficient....

Worst case scenario, the trustee continues your meeting of creditors (that is, reschedules it), and you prepare 3 years worth of 1040 EZ showing with mostly zeros. Not a big deal.

[John341]

Hello,

I am new to the BKfourm. I am going to file a Chapter 7 Pro Se (Using Nolo Book and internet resources), within the next 7-10 days and had a big question on taxes.

For the past (3) tax years I have not been required by the IRS to file taxes because I did not make enough money. My guess is that I provide an affidavit stating this?
Will the Trustee accept this? Are there any "potholes" to avoid with this situation?

Thanks.

[momisery]

We had our 341 meeting and WF called us the next day about our rental home. We had tried forever to get them to take a short sale, and then a deed in lieu. The lost paperwork and we ended up losing a buyer, we lost our tennant and could no longer pay them. So we got the run around then about the DIL. They would not call us back, and suddenly we get a letter from an attorney and a collection letter shortly after that. So, we had to file a BK, no choice with all the other debt and a job loss and medical. I am so angry that they waited until it was good for them. I have heard that if you give them a DIL that they will 1099 you and you have a tax debt? Should we just let them go thru the process to be safe? They have a hearing to lift the auto stay in about a week.

[NSH]

Thanks, HHM. Since I did not see State mentioned specifically in the OP, nor addressed, I thought perhaps they were not discharged in Ch. 7. Hehehe I don't have a reading comprehesion problem, but I am a little overwhelmed at the moment, so I apologize if I missed something. ;)

[HHM]

Any tax based on income can be discahrged, see the very first post of this thread for the rules on what taxes can and cannot be discharged.

If the NY taxes you refer to are state income taxes, they can be discharged if they satisfy the rules, again, see the first post of this thread.

[NSH]

Are there a lot of situations where the taxes are not dischargable? I am going to assume that NY State taxes are not discharged because nobody in this forum has said they are.

[HHM]

Okay, I am a little confused. I owe a ton in back taxes to the IRS and I owe State as well (more on that later) but I am not sure what it means to be "liened" or levied. I have no assets that can be attached, no homes, cars, real estate, or investments. But I keep reading some things about liens and levies and once they are filed they may not be discharged or something. I have always assumed that this meant that you own some sort of property or hard asset that the IRS could attatch and if they did so before you file BK that the lien would survive the BK, so this doesn't apply to me. Now I am not so sure.

Can they levy or put a lien on me if I have nothing to attach? Because reading this thread I am getting a little paranoid even as I search for a lawyer here in the Big Apple.

Oh, and I did not see an answer to this post, and I would like one, if possible. Thanks!

A levy is the actual act of taking some sort of property. For example, a wage levy is a garnishment, a bank levy is where they take funds from your bank account.

The IRS automatically has a lien against "anything" you own by the mere fact of you owing a tax (hence why they can garnish wages or levy bank accounts without filing a lien). The IRS has only ONE exemption, and that is household furnishing, other than that, the IRS can grab anything you have. However, to "perfect" that lien against certain types of assets (i.e. real estate) the IRS must file a "Notice of Federal Tax Lien" either at the county or state. By perfecting the lien, the IRS gets in line with other secured lenders.

In Bankruptcy, if the underlying taxes are dischargeable, then the lien dies with the bankruptcy, meaning, the lien cannot attach to any property that is acquired after the Bankruptcy. But, the lien still attaches to any property of the BK estate. If the taxes are non-dischargeable, the lien survives and can attach to newly acquire property.

[NSH]

Okay, I am a little confused. I owe a ton in back taxes to the IRS and I owe State as well (more on that later) but I am not sure what it means to be "liened" or levied. I have no assets that can be attached, no homes, cars, real estate, or investments. But I keep reading some things about liens and levies and once they are filed they may not be discharged or something. I have always assumed that this meant that you own some sort of property or hard asset that the IRS could attatch and if they did so before you file BK that the lien would survive the BK, so this doesn't apply to me. Now I am not so sure.

Can they levy or put a lien on me if I have nothing to attach? Because reading this thread I am getting a little paranoid even as I search for a lawyer here in the Big Apple.

Oh, and I did not see an answer to this post, and I would like one, if possible. Thanks!

I haven't seen anything about state taxes. Would they be discharged? Does the trustee want to see state returns as well as fed returns?J

[george42]

Does that mean that since the debts are "discharged" that I won't get any 1099-C from my creditors?

[HHM]

I have no assets to speak of, about 25K in Credit Card dept and had my travel trailer, a car repoed and a few days ago my house was foreclosed on. I am judgement proof as far as I know having only $840 monthly social security income. Yeah, I know it's a sad story but don't we all have one. I'm 67 and not in great health but I can get by, however I have a question about IRS tax liability. All my taxes are paid and I have no issue with the IRS. Once I declare Chapter 7 and all these debts are discharged, won't these creditors send me form 1099-C showing the discharged debt as income. If that is the case, will I now have to face 50K or more in IRS debt or will that also be disposed of in bankruptcy court?

Is there a downside to just not paying anyone and not filing Chapter 7 at all. What can they do to me that they haven't already done? At my age, I'm not getting a job anytime soon and by the time I rebuild my credit, I'll probably be dead or at the very least, unable to use the credit, anyway. I sent all the creditors a letter and they don't call me that much anymore. My understanding is that only the IRS can attach my SS income.

grt

No, a bankruptcy does not trigger a forgiven debt 1099, bankrutpcy "discharges" you debt.

[george42]

Question about tax liability after Chapter 7

I have no assets to speak of, about 25K in Credit Card dept and had my travel trailer, a car repoed and a few days ago my house was foreclosed on. I am judgement proof as far as I know having only $840 monthly social security income. Yeah, I know it's a sad story but don't we all have one. I'm 67 and not in great health but I can get by, however I have a question about IRS tax liability. All my taxes are paid and I have no issue with the IRS. Once I declare Chapter 7 and all these debts are discharged, won't these creditors send me form 1099-C showing the discharged debt as income. If that is the case, will I now have to face 50K or more in IRS debt or will that also be disposed of in bankruptcy court?

Is there a downside to just not paying anyone and not filing Chapter 7 at all. What can they do to me that they haven't already done? At my age, I'm not getting a job anytime soon and by the time I rebuild my credit, I'll probably be dead or at the very least, unable to use the credit, anyway. I sent all the creditors a letter and they don't call me that much anymore. My understanding is that only the IRS can attach my SS income.

grt

[tdawg]

HHM- Maybe you can help....

My plan is to file Chapter 7 on a variety of debt. I am self employed, no employees. No assets what so ever.

I have approximately $65,000 of unsecured debt. My income is considerably lower now than it was in recent years(join the club right!?!?).

In Sept of 2007 an IRs examination(audit) began for tax year 2005. After a few weeks of review the agent decided to include 2006 and 2007.

I was assessed an increased tax owed + penalties/interest for 2005 for $25,000. For tax years 06 and 07, it will be about the same according to the paperwork I have received. A total of $75k will be the rough total for the tax years in question.

My question is as follows-

I plan to file on my unsecured debt, as well as ALL of my 3 years of back taxes owed. Although I am confused as to how to include the 06 and 07 back taxes since the BK law states back tax debts have to be a minimum of 3 years old, and 240 days from assessment. Do I just sit on the 05 assessment, and eventually the 06 assessment and hope the IRS fails to levy my bank accounts or earnings until the 07 becomes BK eligible(2011)?

How likely is the IRS to levy my business income or my bank accounts?

Should I file a OIC to thwart their levy efforts until the statute runs to my date I can file?

Thanks...

pba,

Just to give you some info on what happened with me. I was self-employed and owed taxes I could not pay for 1999, 2000, and 2001 to the IRS. They garnished my checking account (less than $1,000 was in it) in 2001 or 2002, but then released the garnishment after I called them. I made a payment plan with them for $500/month in 2002. That lasted about 5 months until I couldn't pay it and stopped paying them. The next year, I filed an OIC which they rejected. The year after that (2004), they garnished my checking account (less than $1,000 again). I had went back to school at this point and was a full time student, so I called them and they released this garnishment. I have been holding my breath ever since, and have received notices from them every year that I owe them taxes, but they have not garnished my wages or bank account. The amount is way too much for me ever to pay off. I'm going to be filing soon and including them.

They have of course taken any refund or stimulus check I would have seen. And I have paid my taxes in full for every year since 2001.

Be careful if you do an OIC with them. As far as statute of limitations go, that time will stop the clock (plus an extra 6 months I think). I think the same thing is true for the 8 month rule, so you'd have to wait an extra 8 months after the OIC is done being reviewed (assuming they reject it). If you can start making payments to them on a payment plan, then you could do that for 8 months to bide your time.

Good luck! This can (and has for me) be a very stressful monkey to have on your back. I will do everything I can to never always pay my taxes on time. It's definitely not worth it.