Archive for the ‘Bankruptcy and IRS Debts’ Category

Always File Your Personal Taxes, Even If You Owe

Most people don’t know that they can discharge Federal Income Taxes in Bankruptcy, but it’s true. I have a case right now where I’m going to be able to discharge almost $40,000 in IRS debt in a Chapter 7 Bankruptcy. The first step to this process is to determine whether or not the tax debts are unsecured priority claims or general unsecured claims. In many instances you can just call the IRS and they will tell you what they consider these debts to be.

Formula for Determining Whether IRS Debt is Dischargeable in Bankruptcy

But there is also a fairly simple formula. Generally speaking, if the tax debt was due and owing more than three years ago, the IRS should consider this debt to be a general unsecured claim, and it will be dischargeable in either Chapter 7 or Chapter 13 Bankruptcy. BUT, this is only if the tax return was filed on time for the year it was due, and that includes prior to the extension date of October 15th as long as it was requested. That’s the importance of filing your taxes on time, even if you owe. If you have substantial 1099 Income, or other untaxed income that you haven’t planned for, you should always file with the IRS on time. That is, because even if you’re unable to pay for these debts there’s a good chance you will be able to deal with them in Bankruptcy three years later. I suspect we will be facing a large influx of overdue 1099 income from the invention of ridesharing companies like Uber and Lyft, which pays their employees on a 1099 basis. Plenty of people are not planning to pay taxes on this income. File your taxes!

Chicago Bankruptcy Attorney Dealing with IRS Debt

If you have issues with the IRS and would like a free consultation regarding these debts call Bankruptcy Attorney Steven J. Grace at 312-493-6912 to see learn your options.

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At The Law Offices of Steven J. Grace, based in Chicago, Illinois, we represent clients throughout Chicagoland, including the cities of Deerfield, Jefferson Park, Lisle, Northbrook, Oak Brook, Park Ridge, Schaumburg, St. Charles and Warrenville; and other communities in Cook County, Dupage County, Will County, Grundy County, Kendall County, Kane County, LaSalle County and Lake County.