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Home 9 Debt Management 9 Is tax debt a main concern in your current financial crisis?

Is tax debt a main concern in your current financial crisis?

by | Oct 24, 2018 | Debt Management

Your personal economics have a lot of impact on your ability to function within the Wisconsin economy. Things may be financially strong for the state as a whole, but if you’re out of work or have recently faced an unexpected expense, it can spark a serious debt problem in your own household. You may be one of many people in this state who had to have surgery this year or who had to pay for much needed car repairs.

Perhaps income tax is your main concern. The good news is that there are often several types of debt relief options, such as bankruptcy, that can help overcome financial problems that have gotten out of hand. The not-so-good news is that not all tax debt is dischargeable. To avoid complications when filing for bankruptcy, it is always best to seek clarification of eligibility requirements as well as to learn more about which types of debts you are able to discharge and which you will still be liable for after bankruptcy.

Issues that determine whether you can discharge tax debt

Your financial situation is unique. While you may go through similar experiences as another person, so many individual details can have an impact on your overall financial status that even the slightest difference between two sets of circumstances can affect the ultimate outcome of a particular situation. The following information includes basic facts regarding tax debt as it applies to bankruptcy:

  • How old your tax debt is affects whether or not you can discharge it through bankruptcy.
  • The older the tax debt, the likelier you can discharge it.
  • Chapter 7 bankruptcy is typically restricted to tax debt associated with income, commission or taxes based on wages as opposed to other types of tax debt, such as property taxes.
  • Tax debt must generally be three years old to be eligible for discharge through Chapter 7 bankruptcy.
  • If you applied for an extension, the IRS includes that in the age of your tax debt, meaning the three years begins with the extension date, not the initial date your taxes were due, which is April 15th of a given tax year.

Other eligibility rules apply, such as those associated with amount of time passed between your filing date for your income tax and the date you file for bankruptcy. If tax auditors assessed your taxes, it must have occurred at least 240 days before you file for bankruptcy.

Seeking clarification of tax and debt relief laws

Unless you have a personal legal background in matters of taxes and debt relief, it can be quite challenging to sort through all the state and federal regulations that may have an impact on your ability to obtain immediate debt relief and to include tax debt as dischargeable debt when you file for bankruptcy. It is always a good idea to ask someone well-versed in such laws to review your case and provide guidance and support to help you determine a best course of action.

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