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What’s the deal with taxes and bankruptcy?

| Dec 11, 2018 | Tax Controversies

Many Massachusetts residents find themselves in dire financial circumstances due to IRS obligations. Whether they can pull themselves out of the situation depends on a variety of factors, and some will find that their best debt relief option involves much more than tightening up the budget or trying to work out a deal with creditors. In many cases, the best way to resolve the situation is to file bankruptcy. However, many people believe that taxes and bankruptcy just do not mix.

Fortunately, that is not always the case. In some instances, taxes may be discharged. Those eligible must meet five criteria. First, at least three years must have passed since the income tax return associated with the tax debt was due for filing.

The tax return in question must have been filed no less than two years ago. No fraud could be suspected or connected to the tax return. The individual in question must not be guilty of tax evasion. At least 240 days must have passed since the tax assessment on the amount an individual wants to discharge. If the amount meets all of these requirements, it could be discharged.

In order to know for sure, it would be a good idea to consult with a Massachusetts attorney who understands how taxes and bankruptcy relate to each other. A review of an individual’s circumstances could reveal that it would be possible to receive a discharge of certain tax debt. Discharging other debts could help improve a person’s financial situation to the point where meeting other non-dischargeable tax obligations would no longer be as much of a challenge. In addition, with the appropriate advice, it may be possible to find a resolution to any remaining tax debt.

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