Click below to watch our new video on bankruptcy, taxes and the IRS!
In this video, you’re going to learn the truth about whether or not taxes may be discharged in bankruptcy.
Generally, taxes are not dischargeable. However, if taxpayers meet a number of key exceptions in a bankruptcy proceeding, then their tax bill will be discharged.
Here are the rules that I cover in the video:
First, you’ll learn that taxes may be discharged only if they relate to a return prepared by the taxpayer or their representative. Taxes from a return prepared by the IRS (the “Substitute for Return”) may not be discharged.
Second, I’ll explain that trust fund taxes may not be discharged. Trust fund taxes are taxes that are collected on behalf of the government, such as sales taxes and payroll taxes. Only income taxes may be discharged
Third, I talk about how civil or criminal fraud invalidates a tax from being discharged.
Finally, I conclude with three different time-related tests that apply to taxes in the context of bankruptcy. Careful scrutiny of a taxpayer’s tax history is required to identify which tax liabilities pass these tests. IRS tax transcripts are critical to making this analysis.
Examples are provided to clarify how these rules work in different situations.
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Founded by Gary Massey, Massey and Company is a boutique CPA firm is located in Atlanta, Georgia serving the needs of small businesses and their owners.