Bankruptcy is a powerful tool in fighting the Internal Revenue Service and dealing with tax debt. Especially when facing collection action or potential penalty, filing for bankruptcy in Colorado will result in the issuance of an automatic stay, which will force the IRS to get in line with everyone else.
The Denver bankruptcy attorneys at George T. Carlson & Associates understand what it takes to protect a client’s rights and deal with tax debt and the IRS as part of a comprehensive approach to bankruptcy strategy and back taxes.
Taxes and your Colorado Bankruptcy
- In some cases, the taxpayer may be entitled to a negotiated settlement with the IRS in a Chapter 13 bankruptcy and the liquidation of some income tax debts is possible through Chapter 7.
- The downside to filing for bankruptcy to deal with tax debt is it will result in the IRS being given more time to collect such debts. The IRS has 10 years to collect tax debt. When bankruptcy is filed, that time is tolled and does not begin again until the case is over – plus an additional six months.
- Even if bankruptcy erases a personal tax obligation, it won’t automatically lift a tax lien.
Eligibility for Tax Forgiveness in Bankruptcy
Taxpayers looking to win forgiveness of tax debt through Chapter 7 or Chapter 13 bankruptcy must meet strict criteria established by the government.
- 3-year rule: Taxes must have been due at least three years before the filing.
- 2-year rule: The tax return was filed at least two years before the bankruptcy.
- 240-day rule: The taxes were assessed by the IRS at least 240 days before the bankruptcy filing.
- Fraud and Evasion: there was no fraud or tax evasion.
- Income Taxes: Are eligible. Not payroll taxes or other taxes.
As you can see timing is important. For instance, seeking the assistance of a Colorado bankruptcy attorney before the government secures a tax lien can be important because a bankruptcy will not get rid of the lien – even if it gets rid of the underlying tax obligations. And it probably won’t come as a surprise that the IRS has made it a complex and cumbersome process.
Contact a Colorado Bankruptcy Attorney Today
If you need bankruptcy assistance in Denver or would like more information, call George T. Carlson & Associates today at 303-789-1313 for a free consultation or contact us online. We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code. Serving clients in Denver and throughout Colorado, including Aurora, Englewood, Lakewood and Boulder.
Denver Bankruptcy Help – 303-789-1313 – Free Consultation
