Tax Help on the Big Biz Show: How to Know if Bankruptcy is a Viable Tax Relief Option

Russ and Sully with the Big Biz Show welcomed back Brian Compton, President of Tax Resolution Services, for more tax relief wisdom – this time about IRS debt and bankruptcy. People are forced to file bankruptcy for different reasons. And I know a lot of folks filed bankruptcy last year because they lost their jobs or they lost their pension.

Bankruptcy is really designed to give people a fresh start, people who have had a catastrophic life event that then causes their financial world to fall off a cliff. So the idea of bankruptcy – some people think, “oh people are trying to sneak around the system” but the purpose is to level the playing field so you can permanently resolve your tax problems once and for all.

Most taxpayers don’t realize that IRS tax debt may be eligible for discharge in bankruptcy. Sometimes bankruptcy is the most appropriate course of action when you have a big tax problem. And other times it’s not- and something like the Offer in Compromise program may be a much better option than bankruptcy.

Bankruptcy does not always remove all tax liabilities as not all IRS taxes, penalties, and interest qualify for complete 100% discharge. In order for a taxpayer to benefit from bankruptcy laws, it is important to get expert tax help to determine whether or not your tax liabilities are eligible for discharge.

In October 2005, Congress enacted the Consumer Bankruptcy Law – including big changes that affect the ability to discharge income taxes. Therefore, it is highly recommended that the taxpayer seek out experienced legal counsel that specializes in tax bankruptcy.

Brian gave Russ and Sully the lowdown on bankruptcy and tax debt. You can start by becoming familiar with how bankruptcy and IRS back taxes work:

Talk to a tax attorney or Certified Tax Resolution Services about the differences between Chapter 7, Chapter 13 and Chapter 11 bankruptcies. Chapter 7 is what everyone wants. Chapter 7 is forgiveness, wiping out everything.
The results of filing for Chapter 7 generally go two ways. “Discharged” means the bankruptcy went through and you’re forgiven. The other term is “dismissed” which means you filed a bankruptcy petition and the judge finds that you don’t have the appropriate financial situation to grant you forgiveness for discharge.
If Chapter 7 isn’t possible, you can then submit a petition for a Chapter 13. A Chapter 13 is basically a structured payment plan called a Wage Earner Plan.

Listen to the full interview with Brian Compton on the Big Biz Show for smart tips on bankruptcy and discharging IRS tax debt.

The U.S. Bankruptcy Court now uses a financial means test that closely mirrors the IRS test for the Offer in Compromise program. Taxpayers struggling with tax debt and considering bankruptcy as a resolution should talk to a tax expert to compare tax debt solutions. Be sure to discuss the impact that filing for bankruptcy will have on your financial situation and credit score versus other tax resolution alternatives.

Sometimes the IRS’s Offer in Compromise program is a much better option than bankruptcy. Bankruptcy will stay on your credit report for the next 10 years. When there are not any other significant debts, the tax obligation can be reduced significantly without the stigma of it being on your credit report for the next 10 years.

Tax Resolution Services is a team of expert tax attorneys, CPAs, and Certified Tax Resolution Specialists who are here to help you with your tax problems. Call our office today at 1-866-IRS-PROBLEMS for a free no-risk tax resolution consultation or visit www.taxresolution.com.

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Tags: Bankruptcy, big biz show, brian compton, Discharging Taxes in Bankruptcy, IRS debt, IRS help, IRS Installment Agreements, Offer in Compromise program, tax help, tax relief, tax settlement