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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2862
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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I owe state taxes in Ar. I have been paying on one year but

Customer Question

I owe state taxes in Ar. I have been paying on one year but now I owe for two years. They have a lien on my car and are making threats to come pick it up. If I filed bankruptcy would it get rid of the state and IRS taxes I owe. I am scared to death
Submitted: 3 months ago.
Category: Tax
Expert:  Barbara replied 3 months ago.

Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

If you are on a payment plan for one tax year and then owe taxes for a subsequent year, the payment plan goes into default and you must re-negotiate the payment plan to include the taxes you owe for the two years.

The determination of whether a debtor can discharge tax debt will depend of the type of tax, how old the tax debt is, if the debtor filed a return, and the type of bankruptcy. Federal income taxes in Chapter 7 are dischargeable if the debtor meets all of the following conditions:

  • The discharge is for income taxes: Payroll taxes and penalties for fraud are not eligible for discharge.
  • The debtor filed a legitimate tax return: The debtor filed a tax return for the relevant tax years at least two years before filing for bankruptcy.
  • The tax liability is at least three years old: The tax debt is from a tax return that was originally due at least three years before filing for bankruptcy.
  • The debtor is eligible under the 240-day rule: The IRS assessed the tax debt at least 240 days before the debtor filed for bankruptcy. If the IRS suspended collection activity during negotiation, the applicable date may be extended.
  • The debtor did not commit willful tax evasion: Possible evasive actions include changing your Social Security number, your name, or the spelling of your name; repeated failure to pay taxes; filing a blank or incomplete tax return; and withdrawing cash from a bank account and hiding it.
  • The debtor did not commit tax fraud: The return contains no information that was intended to defraud the IRS.

My best advice would be to contact a local CPA or Enrolled Agent who can negotiate on your behalf with the IRS and AR. Doing nothing is absolutely the worse thing you can do.

If you are seriously considering bankruptcy, you should speak to a qualified bankruptcy attorney who can assist you.

https://www.nolo.com/legal-encyclopedia/bankruptcy-tax-debts-eliminating-29550.html

http://www.bankrate.com/finance/debt/bankruptcy-can-eliminate-tax-bills-maybe.aspx

Please let me know if I can assist you further.

Thank you and best regards,

Barb

Expert:  Barbara replied 3 months ago.

Just following up with you to see if you have any other questions or concerns. If so, please let me know, and I will be happy to assist you further.

Best regards,

Barb

Expert:  Dr. Fiona Chen replied 3 months ago.

Dear Customer,

In the State of Arkansas, once the taxpayer falls of the payment plan, the case is moving forward to the County Sheriff's department for collection. No wonder you are scared. The Sheriff Department usually does not do installment payment plan. They will require payment in full. Individual Sheriff Department may extend time to pay if you have an extraneous situation in which you have to rely on this vehicle to go to work.

The normal procedure is for the Sheriff Department to toll the car and they auction off the vehicle or any other properties once a month and turn the money to the State.

This is when the installment plan has become default and many attempts by the State has not be responded. Then, the State gives the case to the Sheriff's office.

Well, this is not the official answer, but I just conversed with the State of Arkansas Department of Revenue Collection at(###) ###-####(phone number). There is no website to explain this process and/or procedure.

Sheriff's power usually is limited to his/her county. How they cooperate among themselves, it is hard to say. They usually don't collect for other Sheriff's department. It is a strange suggestion. But it is an alternative. Drive your car out of the County you live in. Don't park or drive on their road. Give the Sheriff Department a call and ask them what your options are. The good thing is that they are after the money and not after you.

The bad thing is that their job is to get the vehicle and auction and close this collection case. They usually collect the whole debt without installment payment plan. So, hopefully, your Sheriff Department is willing to work with you to delay some time. Ask them if you need the car to go to work, what your options are. Or, hopefully, you get to talk with a Sheriff Department which has leeway to allow you to keep your car for a period of time for you to come up with the money.

At the last, hopefully, you have a car which is not very expensive. There are ways you may be able to borrow to get out of the situation. That is what the Government is hoping we do to resolve the matter. Don't go to the loan shark. At the most, you are just loosing the car.

Please feel free to follow up.

Regards,

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP

Expert:  Barbara replied 3 months ago.

First expert here - as I mentioned in my original answer, the bot***** *****ne in your case is to be proactive and contact both the IRS and AR as soon as possible to get this issue resolved.

If you need assistance with this, please let me know.

Best regards,

Barb

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