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Which Tax Debts Bankruptcy Can Discharge

It is everyone’s intention to make their tax payments on time, but difficult life circumstances and financial hardship can make doing so extremely difficult. When these burdens become too much to bear, our attorneys can help you manage your tax debts and assess your options to gain relief.

Bankruptcy & Tax Debt

Fortunately, both types of bankruptcy, Chapters 7 and 13, can assist you in finding relief from tax debt. Filing for bankruptcy is one of the most efficient ways of not only halting tax penalties but also discharging qualified tax debts. There are, however, certain conditions that must be met in order to discharge these debts.

Personal Income vs. Business Taxes

There are types of tax debt, business and personal. In most cases, business taxes are not dischargeable, while personal income taxes are. In the state of California, any business taxes that are considered “trust fund taxes” are considered non-dischargeable in bankruptcy. These kinds of taxes include taxes on sales or payroll.

Any taxes collected for the benefit of being allowed to conduct business in a state, known as “excise taxes”, are dischargeable by bankruptcy.

When Your Taxes Were Assessed

In order for taxes to be discharged through bankruptcy, they must be at least 3 years old or older. If an extension was filed for your taxes that disqualifies them from a bankruptcy discharge, you may be able to pay them off under a different plan.

Taxpayer Conduct

Back taxes cannot be discharged by bankruptcy if they were a result of taxpayer misconduct. Examples of taxpayer misconduct include tax evasion or filing a fraudulent tax return. Misconduct also includes the failure to file a tax return altogether, as a discharge is only available to those who file their taxes on their own.

Contact Our California Bankruptcy Team Today

It is important to act quickly when dealing with tax debts, as there are certain events that can prevent or reset the eligibility of your dischargeable tax debts. The best way to make sure your chances of financial freedom remain uncompromised is by contacting the experienced team of bankruptcy attorneys at Resnik Hayes Moradi LLP.

If you would like to learn more about how bankruptcy can help get rid of your debts, don’t hesitate to contact us today through our website or give us a call at (213) 344-0043 to schedule your free consultation!