Chapter 7 and Federal Taxes

[NewStart2012]

We just filed taxes earlier this year. I read on here that taxes are incl in discharge if filed over 3 years ago. Does that mean since we just filed this year and the penalties were issued this year, they can't be included in the bk?

[BarkingCat]

Hi! Do you know if a tax penalty for filing late can be included in a bk 7? If so, can these be discharged with all other debts? TIA!

If the taxes are dischargable, then yes, any associated punitive penalties, e.g. late filing penalty, are also dischargable.

[NewStart2012]

Hi! Do you know if a tax penalty for filing late can be included in a bk 7? If so, can these be discharged with all other debts? TIA!

[arthoralbert]

Nice information share thanks to all of you..

[ValleYum]

Do I have to pay the IRS monthly payments for three years and after that I can discharge them? How does that situation relate to the Ch13 I am about to file now?

That depends on if you are paying the IRS with spam.

[strawfox]

Do I have to pay the IRS monthly payments for three years and after that I can discharge them? How does that situation relate to the Ch13 I am about to file now?

[biotechsolution]

Correct, if there is a tax lien, the lien survives bankruptcy. However, tax liens are only good through the statute of limitation to collect the underlying tax (10 years), unless the IRS went to the trouble to get a civil judgment.

Also, if the tax lien is for a tax debt that can be discharged, then the lien is only worth the equivalent of your assets. So, for example, if the tax lien is fir 20K, but you only have $2,000 in assets, after bankruptcy, you will only owe $2,000, not all $20K.

Also be cautious if you have a 401k the IRS could still go after it to satify the lien. There is previous case law for this option. Because your 401k is excluded from your BK it is not exempted.

[HHM]

I read through this entire thread and want to verify one thing; if a lien is filed, the tax debt survives the bankruptcy, NO MATTER HOW OLD?

I have been trying to avoid filing bankruptcy for a long time, but now it has come to a boiling point and I cannot even to go grocery shopping, NO EXAGGERATION.

Correct, if there is a tax lien, the lien survives bankruptcy. However, tax liens are only good through the statute of limitation to collect the underlying tax (10 years), unless the IRS went to the trouble to get a civil judgment.

Also, if the tax lien is for a tax debt that can be discharged, then the lien is only worth the equivalent of your assets. So, for example, if the tax lien is for 20K, but you only have $2,000 in assets, after bankruptcy, you will only owe $2,000, not all $20K.

[techguy74]

I read through this entire thread and want to verify one thing; if a lien is filed, the tax debt survives the bankruptcy, NO MATTER HOW OLD?

I have been trying to avoid filing bankruptcy for a long time, but now it has come to a boiling point and I cannot even to go grocery shopping, NO EXAGGERATION.

[butterfly57]

Actually, discharging tax debt has very little to do with state by state issues. The BK code determines if the tax is discharegable.

Sounds like you need to have further discussions with your lawyer. I am concerned, when you say the lawyer files the most cases in the county, that is sometimes not a good thing when you have a hands on case.

Okay, for the answer about the state, thank you. Second, yes I agree, further discussion is needed with attorney or para-legal. The 2nd attorney was the one that kind of boasted that he does the most cases in our very large county, I'm thinking he said that to comfort us in some way. My gut is telling me to go with the 1st guy even though he is somewhat arrogant, and very pompous and he will tell you he's one of best attorney's around. But, I am a supreme worry wart by nature and over think things to the max. Ugh.....what to do, what to do?

[HHM]

Actually, discharging tax debt has very little to do with state by state issues. The BK code determines if the tax is discharegable.

Sounds like you need to have further discussions with your lawyer. I am concerned, when you say the lawyer files the most cases in the county, that is sometimes not a good thing when you have a hands on case.

[butterfly57]

I think your attorney is correct, the taxes appear to be dischargeable, but no one can really say without reviewing transcripts. If tax liens were filed (which sounds like they were), the tax debt becomes "secured" debt for purposes of your BK and your state or fed exemptions do not apply. So that is why your lawyer has told you some amount of tax debt [that equal to the net equity of your assets] will survive the BK.

Yes, I have tax liens. They are first thing on my credit report.

And thank you for responding, I believe now I finally understand "that" part of it. I realize every state is different in as far as they handle tax debt so I'm not sure how NC is in as far as discharging my debt (any ideas?).

I also am on the deed to a home that my ex-husband occupies and pays the bills on for the last 5 years. He's on the 1st mortgage solo and I'm on the home equity line along with him. I plan on including the home equity line in my BK. The first attorney I consulted with (30+ years in the business w/ immense tax knowledge but expensive to hire) he said I probably will have to "sign over" my rights to the house. He did not specify a legal form to do this with. I know it's not as simple as just writing a letter so do I need to prepare a quitclaim deed? The 2nd attorney did not address this part, all he asked was if the home had any equity and I told him "no" at this point in time (it did 5 years ago).

Also, I have read about filing this "motion to Value" with the IRS. First I've heard about it on this site. Is this something I do myself by finding the proper IRS form? Or does the BK attorney do it? I will bring it up with whoever I end up retaining (have reconsidered hiring "the expensive knowledgeable about taxes guy" over "the guy that files the most bankruptcies in our county". Not sure where the $$ is coming from to hire either but I'll have to start selling things on craigslist or ebay.

[HHM]

I think your attorney is correct, the taxes appear to be dischargeable, but no one can really say without reviewing transcripts. If tax liens were filed (which sounds like they were), the tax debt becomes "secured" debt for purposes of your BK and your state or fed exemptions do not apply. So that is why your lawyer has told you some amount of tax debt [that equal to the net equity of your assets] will survive the BK.

[butterfly57]

lol Replying to my own question

First, I am brand new here and pretty overwhelmed at this point. I am preparing to file Chapter 7, I've talked to one attorney (fee's are almost $3,900 including court fees,etc.) he and I have a previous attorney client history together because of a business I operated with my ex. After finding this website and reading through it I have made an appointment with another attorney for Tues. for a consult.

In a nutshell - I owe Federal and NC state taxes, capital gains taxes to be exact, from a piece of property my ex-husband and I sold prior to our divorce. We operated a business off of it and closed the failing business, paid off over $100,000 in tax debt the business owed with the money made off our personal sale of the property. Also, paid off some business credit cards, personal credit cards, business vendors, my vehicle, etc. No one gave me or the ex a heads up as to what to prepare for as far as taxes due. We both waited from the sale, March '07 to when taxes finally got filed Oct. 2008 to be told I owed the IRS $50,000 and the state $25,000 (more now with penalties and interest) my ex-husband owed the same amount and he is finally making payments to the state, not the IRS. His income is much higher than mine. The reason I couldn't pay my taxes was there was barely any money left by the time the taxes were filed.

I was trying to survive on my own after being married 25 years and being a business owner. I started working part time, May '07 and dipping into what little money I had left to help pay rent, utilities, gas, food, etc. I became unemployed Feb. 2009 and finally employed by the grace of God, Jan. 2011, small part time job making what I made hourly 20 years ago. My situation has not improved financially. I own some household items. Owe about $2,000 CC debt and $2,000 medical bills. There is a home equity line of credit in my name and in my ex-husband's name against the home my ex-husband is still living in. The primary mortgage is in his name alone but the deed is in both our names. He has avoided foreclosure several times and has worked something out with the banks.

Fast forward to June 2011. The state has frozen my bank account so I am now at the 3 year mark to file bankruptcy. The attorney told me my taxes would be dischargeable, I was also told I'll only owe what I own in household items and vehicle value. But, after reading through here I'm terrifed about this tax debt. and the meeting with the trustee down the road. The attorney did mention I may have to sign off on the house, or sign my interest over to my ex-husband, something like that. Is there anything I'm missing here that I may need to ask the next couple of attorneys I confer with? I feel so lost and confused and not very comforted by the attorney I spoke with.

Please someone, anyone have any insight or comments about my dilemma? I did meet and retain another attorney that was recommended by someone I know. His prices are more affordable even though I haven't come up with the initial $500 he needs. But, he also said the taxes are dischargeable except for 10% of what my personal items and vehicle add up to. He doesn't specialize in taxes, he just does the most bankruptcy cases in my county. I'm still feeling uncertain. I hate to claim bankruptcy if my taxes won't be dischcargeable, that's the only reason I'm forced into Bk.

[spearmint]

Sorry I meant to say:

spearmint, jnewman appears to be posting SPAM

Ahhh. I didn't catch that! You might be right.