Chapter 7 and Federal Taxes

[HHM]

Having a balanced owed may kick you out of non-collectable, but you can probably just reinstate it. Even though non-collectable is not permanent, for all intents and purposes it is.

[Sariah]

I am pro se in ch 7. Shortly after my bk filing, I received a letter from IRS I owe approx $16K from 2009. I want to try an OIC, however, I was told by the IRS that I have to wait till after my bk is discharged to apply. I am in the middle of a loan mod for my house, and if I do not get a decent one whether before or after the discharge I will walk away from the house. From what I read in a previous post, I assume the IRS has an automatic lien. If that is true, and I walk away, would they take the $16K from the house would I still apply for the OIC?

[HHM]

The IRS lien gets in line behind the mortgages, so the IRS will not get anything.

The IRS is right, you will need to wait to discharge before applying for an OIC.

[nikkiheaven]

So, Can some help me out. I understand the 2 year old rule. My husband never filed the tax return. BUT the IRS sent us a tax bill based off of what they thought the business was worth, and what the taxes will be and we have been paying monthly. So since we've been paying, does the 2 year old rule still apply. Can he still filed even though the tax bill is like 6 years old.

[HHM]

So, Can some help me out. I understand the 2 year old rule. My husband never filed the tax return. BUT the IRS sent us a tax bill based off of what they thought the business was worth, and what the taxes will be and we have been paying monthly. So since we've been paying, does the 2 year old rule still apply. Can he still filed even though the tax bill is like 6 years old.

Yes, the 2 year rule still applies, a substitute for return DOES NOT count as a filed tax return for purpose of the 2 year rule. So, if your husband never filed the return, the tax is not dischargeable.

[jetsfan2010]

I have learned more about taxes and BK in this 10 page thread then any attorney I have PAID to know this stuff!

[kjg812]

I was discharged back in March. I dishcarged 66k of IRS debt. By the end of March I received a notice that they wanted to go after my unsecure exempt property I called them to see what they wanted and they wanted 10k for the value of the vehicle I exempted. I repsonded that the vehicle was in an accident and not worth anything near that value. She then asked me what thought it was worth and I answered 2-3k. She then asked if I could send in the 3k to which I answered no. At this point she told me that if I did not pay by a certain date that they could send someone to pick up the vehicle. Fast forward to yesterday and I received a letter from the IRS that was a cerftificate of release of federal IRS lien. Does this mean I can sell the vehicle now? Should I also be able to get it removed from my credit report?

[jetsfan2010]

they released the lien based off the bankruptcy discharge?

[kjg812]

I did nothing to request the lien be released. They sent me the certificate of release in the mail stating the lien had been satisfied

[HHM]

they released the lien based off the bankruptcy discharge?

The IRS will sometimes do this if the only assets with equity in the BK are household goods. It just depends.

[iamprose]

The IRS will sometimes do this if the only assets with equity in the BK are household goods. It just depends.

Do you think an innocent spouse exemptions would be separate(and not liable to irs seizure) in a jointly filed BK7. Specifically if a spouse tax debts were all from before marriage, if the tax debtor had no assets, is the irs entitled to sieze BK7 federally exempted assts from the innocent spouse. Could it matter if any previous 1040's were filed jointly? Thanks, this has been a very difficult question to find a reliable answer to.

[shadowb]

All this bankruptcy and tax stuff has me confused. My ex-husband and I filed chapter 13 bankruptcy in December 2007. We were forced into the 13 after a letter was received by the IRS and they levied our bank accounts. Note, all this time I THOUGHT my ex was paying on the payment plan we had set up. Also note these taxes were for 2004, 2005, 2006, 2007, and 2008. 2004 is now paid in full. So, that leaves 2005 through 2008. In 2009 he blindsided me with divorce papers and a month later I received notification that he filed a motion to sever our 13 and he hired his own bankruptcy attorney. Because of my income, I didn't qualify to stay in the 13, so I was forced into a 7, which was converted for me by an attorney I had to retain. When the attorney converted my case, he told me that BECAUSE my ex was paying the federal and state tax debts, I would not be pursued and that I would be able to receive any future income tax refunds. I am now remarried. My current and I filed our income taxes married and joint. We are supposed to be due refunds from both state and federal. We just received a letter from the state of Louisiana informing that they took our refund and applied it to the 2005 tax debt that the ex and I had. I am very upset about this AND confused because I was told not only by my bankruptcy attorney but also the CPA who prepared my taxes that I would "be able to enjoy any future refunds". Does anybody have some kind of insight on this? I thought my divorce and my bankruptcy were done, yet it seems like the hits just do nothing but keep on coming.

[iamprose]

All this bankruptcy and tax stuff has me confused. My ex-husband and I filed chapter 13 bankruptcy in December 2007. We were forced into the 13 after a letter was received by the IRS and they levied our bank accounts. Note, all this time I THOUGHT my ex was paying on the payment plan we had set up. Also note these taxes were for 2004, 2005, 2006, 2007, and 2008. 2004 is now paid in full. So, that leaves 2005 through 2008. In 2009 he blindsided me with divorce papers and a month later I received notification that he filed a motion to sever our 13 and he hired his own bankruptcy attorney. Because of my income, I didn't qualify to stay in the 13, so I was forced into a 7, which was converted for me by an attorney I had to retain. When the attorney converted my case, he told me that BECAUSE my ex was paying the federal and state tax debts, I would not be pursued and that I would be able to receive any future income tax refunds. I am now remarried. My current and I filed our income taxes married and joint. We are supposed to be due refunds from both state and federal. We just received a letter from the state of Louisiana informing that they took our refund and applied it to the 2005 tax debt that the ex and I had. I am very upset about this AND confused because I was told not only by my bankruptcy attorney but also the CPA who prepared my taxes that I would "be able to enjoy any future refunds". Does anybody have some kind of insight on this? I thought my divorce and my bankruptcy were done, yet it seems like the hits just do nothing but keep on coming.

Sorry to hear about the unexpected levy shadowb. Been there..done this... so I would contact my local tax advocate(you need to determine the correct office for your area). You can use their official form, to request their help, or jus write a letter, and you should recieve a reply fairly quickly. You did not mention if these are your personal tax debts as well as your ex-husbands, but the amount of the recent levy attributible to your present husbands refund, should be returned, at the least. In my state, the notification of levy includes specific instructions for requesting return of the levied amount, but the irs has never acknowledged this procedure the times that I have followed it(until I contacted the tax advocate). The tax advocate info you find requests that you exhaust your attempts to resolve your dispute with the irs, but I stopped wasting my time with the irs and now proceed directly to the tax advocate without a problem. The irs claims you only have 9 months from the date levied to request a return of the levied assets. I thought it was 2 yrs for an innocent/injured spouse claim(in fact their is a bill before congress now to extend that 2yr window to 3yrs? I believe). You probably will not have this problem(with your present husbands levied refund anyway) if your husband files his tax returns separately(not jointly) as 'head of household'?? I think. You did not specify if the state kept your refunds or if they forwarded it to the irs. My understanding of Louisiana is that it can sometimes be like you are in a completely different country. In any event, I believe someone should be writing you a check before you know it. I would be interested to hear how smoothly it goes for you. It's pretty much your choice as to whether to let them stress you out and spoil your day, even if you really needed that refund check now. Choose to have a wonderful day! Best of luck!

[queeniam75]

Hello all,

I have a burning question about this back tax issue. I owe a total of $9980 (for yrs, 01,04,05,06) and a total of $22916 for (07,08,09,10). I thought I could discharge the earlier yrs due to the 2yr rule b/c I filed them late but the lawyer said b/c I have a tax lien that they would have to be PAID in full (instead of 10% of the balance) just like the later yrs...

[HHM]

Hello all,

I have a burning question about this back tax issue. I owe a total of $9980 (for yrs, 01,04,05,06) and a total of $22916 for (07,08,09,10). I thought I could discharge the earlier yrs due to the 2yr rule b/c I filed them late but the lawyer said b/c I have a tax lien that they would have to be PAID in full (instead of 10% of the balance) just like the later yrs...

Sort of true, but it is situation specific.

The tax debt for the earlier years are not treated as secured debt (Because of the tax lien). The debt, itself, is dischargeable, but like all liens in BK, the lien survives. So, the issue will be the value of your assets (and exemptions do not count). So, if the value of your assets exceeds what you owe in tax debt, yes, you will need to pay the tax debt.

I think your attorney may be over generalizing the issue. Incidentally, I don't get this statement ("instead of 10% of the balance just like in later years"), the later years would be priority tax debt and non-dischargeable, so those would most definitely need to be paid regardless of a lien.