Personal Tax Liabilities
Updated: Aug 25, 2020
Tax Liability for Personal Bankruptcy
Bankruptcy offers some unique tools to deal with tax debt. When available, bankruptcy tax relief is unmatched by any other debt relief solution. If you owe taxes we may be able to help you eliminate some, or even possibly all, of your tax debt.
Debts that are forgiven by a creditor are deemed taxable income by the IRS. Debts discharged through bankruptcy are not considered income thereby effectively decreasing your taxable income.
Tax Interest and Penalties
Taxes that cannot be discharged, must be paid, and incur interest and penalties at a substantial rate. However, when properly dealt with while under the protection of the bankruptcy court, interest and penalties do not continue to accrue.
A Tax lien is an non-dischargeable order of payment by the court. It must be paid; it does not go away. However, the amount due may be reduced, sometimes substantially, and we may be able to structure payments to help ease the burden.
Tax treatment in bankruptcy is a complex subject, dependent on specific circumstances. A detailed analysis of your situation is critical to determining what relief may be available to you. Talk to us, we can help.
Though business tax interests differ from personal tax interests, tax relief may be available to businesses as well. Business tax relief is addressed in more detail on the Business Bankruptcy page.