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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4300
Experience:  Experienced consumer bankruptcy attorney.
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I have been is an IRS status 53 non-collectable status for

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I have been is an IRS status 53 non-collectable status for the past 18 months. I received a notice that the IRS is going to again begin to see if I am able to pay the back due taxes. The tax years are 2004 thru 2009. The total debt is approx. $49,000.00. I am beginning to look at which way I would be better off, to file a simple no asset chapter 7 bankruptcy and do away with all other debts, including hopefully some of the taxes, or whether I should look into an OIC. I went online and did a test to see if I would qualify for an OIC, the results were 24 monthly payments of 135 and some change. Would any or all of these taxes be discharged in a chapter 7 bankruptcy?

A.J. :

Hello, and thank you for using Just Answer. My name isXXXXX am a bankruptcy law professional, and I look forward to answering your questions this afternoon.

A.J. :

While as a general matter, tax debt cannot be wiped out in bankruptcy, there are limited circumstances in which back federal tax debt can be discharged. If every one of the following applies, the court may discharge back taxes owed:

Customer:

ok....and what are the conditions

A.J. :

give me a moment while I type them all out....

A.J. :

  • All tax debt is from income tax only. Anything owed to the IRS other than income tax, such as payroll taxes, cannot be discharged.

  • You did not commit fraud or willful evasion. If you filed a fraudulent tax return or in any way intentionally attempted to avoid paying taxes bankruptcy can't help.

A.J. :

  • The debt is at least three years old. The tax return from which the tax stems must have been originally due at least three years before you filed for bankruptcy.

  • You filed a tax return. You filed a tax return for the debt that you are seeking to discharge at least two years before filing for bankruptcy.

  • The 240 day rule. The tax debt that you want to have discharged must have been assessed by the IRS at least 240 days before you file your bankruptcy petition.

A.J. :

If each of these apply, then you may be able to to discharge income tax debt.

A.J. :

You of course also have to be otherwise eligible for chapter 7 (meaning you either make less than the median income based on your household size, or you pass a somewhat complicated means test).

Customer:

I am aware of the means test and I should be able to pass that without an issue....thanks for your input. the rest is now for me to figure which way I want to go. I do have some bad debt I would like to get rid of. Thanks so much for your help.

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