We Get Rid of Back Taxes

There is a common myth that filing bankruptcy won't help with back taxes. Nothing could be further from the truth. While certain types of tax obligations are non-dischargeable, in most cases filing a Chapter 7 bankruptcy can eliminate outstanding income tax debt owed to the IRS, the State of Michigan, and cities such as Detroit or Pontiac.

When Income Taxes Can Be Discharged

To discharge income taxes owed to the government, three general conditions must be met:

1. the tax debt must be at least three years old (originally due at least three years before you file);
2. you filed the tax return at least two years before filing bankruptcy; and
3. the IRS assessed the debt at least 240 days before you file.

An Example

Say you filed an income tax return a few years ago and owed the IRS $5,000, but didn't have the money to pay. Since then they've sent letters, added penalties and interest, and tried to garnish your bank account — but were never able to collect. Now you've started a new job and you're worried they'll garnish your paycheck (or they already have). In this case, filing a Chapter 7 may help — but timing is very important, because of the “means test.”

To file a Chapter 7 and get your debt discharged, you have to pass the means test — essentially a six-month look-back at your income. If, during the previous six months (before you started the new job), your average monthly income was below the state median, you may be eligible to file a Chapter 7 and discharge your back taxes. So if a new job substantially increases your income, it is often wise to file your Chapter 7 right away, before your six-month average climbs. And if you file and obtain a Chapter 7 discharge, you'll get the other benefits too, including shedding credit card and other unsecured debt.

Even if you don't qualify for Chapter 7, you can still file a Chapter 13, which can also let you treat the back taxes owed as a dischargeable, unsecured debt.

The bottom line: if you owe back taxes and want to find the best way to get rid of them, it's worth calling us right away at 248-417-9800 or contact us online to set up a free, no-obligation, confidential consultation. Our phone lines are available 24 hours a day.

Pursuant to 11 U.S.C. § 528 we are required to state that we are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.