Chapter 7 and Federal Taxes

[Derick]

Great posts!!
If I owe for 2003 and 04 and am filing chapter 13, do I sill owe the tax liability?

[lesleynoelle]

Dear HHM,

I understand that if your 1040 tax debt does *not* meet the 3-year rule, it is not dischargeable. But does that mean you don't list it on Schedule E? Or is it a "priority claim" whether or not it is dischargeable? If not Schedule E, then where do you list it? Thank you.

[srjth]

i have an installment payment agreement with both federal and state (NY). i entered chapter 7 in mid-december 2009 and both NYS and federal did the direct debit from my account in december, but it seems that NYS has not did their direct debit for january. is that placed on hold/deferred until i am discharged? my lawyer did not mention anything about this to me, so i'm kind of stumped at the moment. from searching on this site, it looks like installment agreements with the IRS are placed on hold/suspended until the bankruptcy is finished. is that correct?

I have a suspended installment agreement for my State taxes as well (I'm paid up on federal taxes) so I'm wondering this as well.

Does anyone know how state taxes owed are handled in ch. 7 bankruptcy?
I owe $328. I could pay this off now before the 341 meeting if that would help but I don't want to do that if it will botch things up.

[CarrieOakey]

Sooooo....I was able to discharge back taxes in no-asset Ch 7 last year. Received Release Of Federal Tax Lien about three weeks after the discharge.

Now IRS wants to apply my current refund to the discharged debts; doesn't the ROFTL prevent this?

I'm so confused.

[ToughTimes]

DarthMittens, (LOVE that name!)

I am not certain from your post, but it sounds like the only debt you are asking about is debt discharged in your bankruptcy.

You don't owe tax on debt discharged in bankruptcy.

If you do receive any 1099-Cs from prior creditors on debt discharged in bankruptcy, you use Form 982 to let IRS know (on line 1a) that the debt was cancelled in a Title 11 proceeding.

[DarthMittens]

Good Question about BK 7 & Taxes

Hi Gang!

First off I want to thank everyone for being so supportive and helpful. I think I would have seriously lost my mind if it wasn't for you guys!

My question is this:

When I filed ch 7 I had no house, no land, no business and no owed taxes from the previous years. All that was discharged was credit cards & 1 consolidation loan. I kept my car.

What taxes would I owe if it was only debt that I discharged? Who would notify me if I do owe extra taxes?

I emailed my Lawyer and asked but he's a bit busy and has not gotten back to me yet.

Thanks again gang!

~M

[HHM]

I was just reading this post on taxes and bk and was wondering if we should file a Motion to Determine Value of Lien. Here's our deal: 2007 & 2008 taxes are owed, around 25k. Filed bk on 1/12/10. So those tax debts don't fit within the 3 or 2 year rule. Right (2007 taxes would be filed 4/15/08, and 2008 taxes would be filed 4/15/09) This assumes my husband didn't file an extension. With this in mind, they wouldn't qualify, right? Fine, no shocker there. However, your comment on a Quasi Lien Strip might be something to think about. I am upside down in my home. Absolutely negative. Should I consider filing a Motion to Determine Value of Lien? By the way, I am not aware of a lien being placed on my home. However I have never checked my credit reports for that. You state that the lien is in place whether or not you receive a notice. Final bk papers due next week, need to know how to handle this tax debt. Thanks.

Probably not worth the effort. Don't confuse the defacto lien with the actual lien. For property like homes, the IRS must file a Tax Lien. In your case, it doesn't matter; reason being, the IRS can still place a lien on your property after the bankruptcy is discharged because these are non-dischargeable taxes.

[BigHairyPig]

I was just reading this post on taxes and bk and was wondering if we should file a Motion to Determine Value of Lien. Here's our deal: 2007 & 2008 taxes are owed, around 25k. Filed bk on 1/12/10. So those tax debts don't fit within the 3 or 2 year rule. Right (2007 taxes would be filed 4/15/08, and 2008 taxes would be filed 4/15/09) This assumes my husband didn't file an extension. With this in mind, they wouldn't qualify, right? Fine, no shocker there. However, your comment on a Quasi Lien Strip might be something to think about. I am upside down in my home. Absolutely negative. Should I consider filing a Motion to Determine Value of Lien? By the way, I am not aware of a lien being placed on my home. However I have never checked my credit reports for that. You state that the lien is in place whether or not you receive a notice. Final bk papers due next week, need to know how to handle this tax debt. Thanks.

[tk421]

i have an installment payment agreement with both federal and state (NY). i entered chapter 7 in mid-december 2009 and both NYS and federal did the direct debit from my account in december, but it seems that NYS has not did their direct debit for january. is that placed on hold/deferred until i am discharged? my lawyer did not mention anything about this to me, so i'm kind of stumped at the moment. from searching on this site, it looks like installment agreements with the IRS are placed on hold/suspended until the bankruptcy is finished. is that correct?

[MADinNJ]

Was the adjustment actually made for tax year 2006?

If yes, you are correct, you need only worry about the 8 month rule.

I wouldn't worry about the fraud objection in this scenario, not worth the time and effort and you didn't actually commit fraud.

Thanks. Yes. I just got all my transcripts from the IRS today for the past four years. Under tax period ending December 31, 2006 the transcript shows those adjustments made by the IRS in 2008.

After finding this board a couple of weeks ago I've been doing the little things to get myself ready to speak with an attorney before filing CH7. Assuming things are going about the same financially as they are right now then April 16th 2010 will be my filing date. I just have to order the NOLO book so that between this site and the book I should be well prepared.

[HHM]

Was the adjustment actually made for tax year 2006?

If yes, you are correct, you need only worry about the 8 month rule.

I wouldn't worry about the fraud objection in this scenario, not worth the time and effort and you didn't actually commit fraud.

[MADinNJ]

Hello. Is a "review of unreported income" with "additional tax assessed" considered an audit?

This is the background. I had a credit card account that I settled and as a result had the difference considered income by the IRS about a year and a half later. Tax year was 2006, filed on April 15th 2007, IRS adjustment made on September 2008. I still owe tax for this year mostly due for that adjustment of almost 4k.

When is the earliest I could dream of putting this amount on a bankruptcy filing? On April 16th 2010 it will be 3 years since the filing. The 8 month rule for audits would have passed in June 2009. Is my thinking correct?

How likely is the IRS to challenge my attempt to include this tax year under some broad interpretation of fraud?

Thanks for any clarification offered.

[HHM]

That is true.

1. You cannot abate (or remove) accrued interest.
2. In certain circumstances, you can have the penalties abated (removed).
However, before you can request removal of the penalties you must either pay the tax (all of it, including the penalties) or enter into a payment plan with the IRS. Once you have a formal installment agreement, you can then request an abatement of penalties. If you pay the tax, then you request a refund of the penalties.
3. To qualify to have the penalties abated, you must show reasonable cause. That is you, need a good explanation as to why the penalty should be abated. Thus, it depends on what the penalty is. If it is a failure to file penalty (i.e. you didn't file your tax return on time), your explanation must explain why you didn't file.

[Denart]

I found this little piece of information...I wish I could remember where.
Does anyone know where to locate this in the tax code. It would be very much appreciated
the IRS will take into consideration are: drug and alcohol abuse; a death in the family; a life threatening disease or medical condition, embezzlement or theft for businesses.
I am a recovering alcoholic (sober over 6 years now) but the non filed years were a direct resulr od me haveing my head not stuck in the sand but a bottle of vodka.

If this is true I need a lawyer that is familiar with this. Hopefully my wife can file without me. I can resolve my tax problem to a manageable amount, and I wont have to file BK, saving my credit.
Get the tax paid, attempt a quasi tax lien strip, and life will be sooooo much better

[qsr]

I think I've used credit cards a few times over the past couple of years to pay on a payment plan with the IRS. Do I need to subtract these amounts from my dischargeable debt and add it to my tax debt? Also hoe does the money get paid to the CC companies in this situation?