The General Motors bankruptcy may become an unthinkable reality as the company faces a Monday deadline to prove its financial viability to the federal government. The looming bankruptcy could financially cripple the community of Flint, Michigan, where GM is based.

If the company files Chapter 11, the region will be have to weather plant closings and massive layoffs. The consequences of the company’s pending bankruptcy are very complex,  and will affect GM workers, retirees, pensioners, and those owed money by the company.

The government seems to be changing bankruptcy rules on the fly with regard to GM and Chrysler…e.g. bond holders lost priority and unions got a bigger share than they ordinarily would be entitled to in a bankruptcy proceeding.

That said, I think a lot of the employees of GM and Chrysler who have lost their jobs may personally need to consider bankruptcy…and may either file Chapter 7 for forgiveness of their debts including back income taxes, if eligible, or Chapter 13 to structure a long term payment plan.

Typically, there are 3 threshold tests which must to be met for a tax year to be dischargeable in bankruptcy

–Have 3 years elapsed from when the tax return was due to be filed before filing for bankruptcy?
–Have 2 years elapsed from when the tax was assessed, usually when the tax return was filed?
–Have 240 days elapsed from when the tax was assessed and the bankruptcy petition was filed?

For those taxpayers who owe a significant amount in back taxes- less than 3 years old- or who have simply not filed tax returns and have little if any other debts, bankruptcy may not be the best option.

Both taxpayers and bankruptcy attorneys routinely seek out Tax Resolution Services Co.’s advice on how best to proceed in this type of situation.

In many instances, we can help the taxpayer achieve the same results as a bankruptcy via either the IRS’s Offer in Compromise Program or a structured payment plan with the IRS (without the taxpayer having to file bankruptcy).  Essentially, they get the same financial outcome without having their credit report being marred by a BK filing for the next 7 to 10 years.  In an Offer in Compromise tax debt settlement, the IRS is not required to report the forgiveness of back taxes to the three major credit reporting bureaus.

** For more income about discharging taxes in bankruptcy or other income tax relief options, visit the Tax Resolution Services web site for a free tax relief consultation or call 866-IRS-PROBLEMS.

More Tax Help, IRS News and Tax Relief Tips:

1. We’ve Expanded to Help More Taxpayers Resolve Their IRS Tax Problems!
2. IRS Offer in Compromise Helps Taxpayer in Monroe, WA Save More Than $200,000
3. 5 Reasons to File Delinquent Tax Returns: There’s Still Hope if You Haven’t Paid Your Taxes This Year
4. Tax Compromise Improvement Act Helps Struggling Taxpayers Enter into Offer in Compromise Agreements with IRS
5. Retire Your IRS Back Taxes Forever: How Tax Resolution Services Helped Save a Taxpayer $130,000

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This entry was posted on Thursday, May 28th, 2009 at 11:04 am and is filed under Tax news and tips, Working with the IRS. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.