Chapter 7 and Federal Taxes

[NSH]

Okay, I am a little confused. I owe a ton in back taxes to the IRS and I owe State as well (more on that later) but I am not sure what it means to be "liened" or levied. I have no assets that can be attached, no homes, cars, real estate, or investments. But I keep reading some things about liens and levies and once they are filed they may not be discharged or something. I have always assumed that this meant that you own some sort of property or hard asset that the IRS could attatch and if they did so before you file BK that the lien would survive the BK, so this doesn't apply to me. Now I am not so sure.

Can they levy or put a lien on me if I have nothing to attach? Because reading this thread I am getting a little paranoid even as I search for a lawyer here in the Big Apple.

Oh, and I did not see an answer to this post, and I would like one, if possible. Thanks!

I haven't seen anything about state taxes. Would they be discharged? Does the trustee want to see state returns as well as fed returns?J

[HHM]

Okay, I am a little confused. I owe a ton in back taxes to the IRS and I owe State as well (more on that later) but I am not sure what it means to be "liened" or levied. I have no assets that can be attached, no homes, cars, real estate, or investments. But I keep reading some things about liens and levies and once they are filed they may not be discharged or something. I have always assumed that this meant that you own some sort of property or hard asset that the IRS could attatch and if they did so before you file BK that the lien would survive the BK, so this doesn't apply to me. Now I am not so sure.

Can they levy or put a lien on me if I have nothing to attach? Because reading this thread I am getting a little paranoid even as I search for a lawyer here in the Big Apple.

Oh, and I did not see an answer to this post, and I would like one, if possible. Thanks!

A levy is the actual act of taking some sort of property. For example, a wage levy is a garnishment, a bank levy is where they take funds from your bank account.

The IRS automatically has a lien against "anything" you own by the mere fact of you owing a tax (hence why they can garnish wages or levy bank accounts without filing a lien). The IRS has only ONE exemption, and that is household furnishing, other than that, the IRS can grab anything you have. However, to "perfect" that lien against certain types of assets (i.e. real estate) the IRS must file a "Notice of Federal Tax Lien" either at the county or state. By perfecting the lien, the IRS gets in line with other secured lenders.

In Bankruptcy, if the underlying taxes are dischargeable, then the lien dies with the bankruptcy, meaning, the lien cannot attach to any property that is acquired after the Bankruptcy. But, the lien still attaches to any property of the BK estate. If the taxes are non-dischargeable, the lien survives and can attach to newly acquire property.

[NSH]

Are there a lot of situations where the taxes are not dischargable? I am going to assume that NY State taxes are not discharged because nobody in this forum has said they are.

[HHM]

Any tax based on income can be discahrged, see the very first post of this thread for the rules on what taxes can and cannot be discharged.

If the NY taxes you refer to are state income taxes, they can be discharged if they satisfy the rules, again, see the first post of this thread.

[NSH]

Thanks, HHM. Since I did not see State mentioned specifically in the OP, nor addressed, I thought perhaps they were not discharged in Ch. 7. Hehehe I don't have a reading comprehesion problem, but I am a little overwhelmed at the moment, so I apologize if I missed something. ;)

[momisery]

We had our 341 meeting and WF called us the next day about our rental home. We had tried forever to get them to take a short sale, and then a deed in lieu. The lost paperwork and we ended up losing a buyer, we lost our tennant and could no longer pay them. So we got the run around then about the DIL. They would not call us back, and suddenly we get a letter from an attorney and a collection letter shortly after that. So, we had to file a BK, no choice with all the other debt and a job loss and medical. I am so angry that they waited until it was good for them. I have heard that if you give them a DIL that they will 1099 you and you have a tax debt? Should we just let them go thru the process to be safe? They have a hearing to lift the auto stay in about a week.

[John341]

Hello,

I am new to the BKfourm. I am going to file a Chapter 7 Pro Se (Using Nolo Book and internet resources), within the next 7-10 days and had a big question on taxes.

For the past (3) tax years I have not been required by the IRS to file taxes because I did not make enough money. My guess is that I provide an affidavit stating this?
Will the Trustee accept this? Are there any "potholes" to avoid with this situation?

Thanks.

[HHM]

Hello,

I am new to the BKfourm. I am going to file a Chapter 7 Pro Se (Using Nolo Book and internet resources), within the next 7-10 days and had a big question on taxes.

For the past (3) tax years I have not been required by the IRS to file taxes because I did not make enough money. My guess is that I provide an affidavit stating this?
Will the Trustee accept this? Are there any "potholes" to avoid with this situation?

Thanks.

An affidavit to that effect should be sufficient....

Worst case scenario, the trustee continues your meeting of creditors (that is, reschedules it), and you prepare 3 years worth of 1040 EZ showing with mostly zeros. Not a big deal.

[cinderella]

Tax lien, quasi lien strip question

I have a few questions about the response to this post. You mentioned that the lien the dischargeable taxes "dies" in the BK case. Does this mean I do not have to file a quasi lien strip or that motion to value the lien that you mentioned in your previous posting? If it dies, am I not personally responsible for the debt and it no longer attaches to anything?

My situation:

I filed a no-asset case on 10/30/2009.

I owe $47,000 for back IRS income taxes between 2002-2008. About $30,000 of that is dischargeable because those years we filed over 3 yrs ago.

I have liens on all years when the IRS placed it in uncollectable status

I have a house but I am upside down in it and owe more than it is worth.

I am trying to research all my options to make sure I don't end up in a situation when I am discharged but "still owe " and have personal liability

Thanks

In Bankruptcy, if the underlying taxes are dischargeable, then the lien dies with the bankruptcy, meaning, the lien cannot attach to any property that is acquired after the Bankruptcy. But, the lien still attaches to any property of the BK estate. If the taxes are non-dischargeable, the lien survives and can attach to newly acquire property.

[HHM]

I have a few questions about the response to this post. You mentioned that the lien the dischargeable taxes "dies" in the BK case. Does this mean I do not have to file a quasi lien strip or that motion to value the lien that you mentioned in your previous posting? If it dies, am I not personally responsible for the debt and it no longer attaches to anything?

My situation:

I filed a no-asset case on 10/30/2009.

I owe $47,000 for back IRS income taxes between 2002-2008. About $30,000 of that is dischargeable because those years we filed over 3 yrs ago.

I have liens on all years when the IRS placed it in uncollectable status

I have a house but I am upside down in it and owe more than it is worth.

I am trying to research all my options to make sure I don't end up in a situation when I am discharged but "still owe " and have personal liability

Thanks

You will need to address this with your attorney. Being a no asset case is not good enough vis-a-vis IRS taxes, bankruptcy exemptions do not apply to tax debt. So, you may be a no-asset case for purposes of BK, but still have "assets" for purposes of the tax lien. Thus, usually, you would likely still need/want to do a Motion to Value and strip as appropriate even for the lien associated with dischargeable tax debt.

[biotechsolution]

You're best bet is to contact the IRS agent who handled your bankruptcy case and see for what amount he'll settle with you to release the liens.

BUT first wait until after your discharge, you may get lucky and the IRS may generate a automatic lien release.

But HHM is right, there are pretty no exempt assets when it comes to the IRS but since you don't have any real exemptions (homestead) it may not take much to have them release the lien.

HOWEVER, the other thing that isn't exempt from the IRS is your 401k, it you have money in that expect the IRS to levy it for your taxes.
There is plenty of case law on it and they win every time.

what happens is 'your' aren't responsible for the tax debt after discharge..but everything you had at the time of filing is responsible, including your 401k.

[cinderella]

Is this something I can do myself? My attorney has been know help since I paid the attorney feeS in full. I have asked about this several times but no one gets back to me. I know I have no assets except for about $20000 in my 401k and most of that is profit sharing which cannot be touched until I retire /about 35 yrs from now. I know I have no other things of value.

[biotechsolution]

You can do all this yourself. However if you have a good tax attorney that might be your best bet when dealing with your 401k and the IRS.

Technically that 401k is an excluded asset since it was never part of your bankruptcy filing and is there for the IRS. If the IRS thinks they can even get a few thousand out of it they will try. A good attorney will explain to them why they can't touch it. According to the IRS they don't even need a lien to go after 401k's after bankruptcy discharge.

Your fist step is to contact the IRS insolvency agent assigned to your bk and see what they say. Ask them about releasing the liens.

[cinderella]

This is very helpful! I did not know there was an IRS agent assigned to my case. I have not received any correspondense from the IRS. (I filed on 10/30/2009).

Do you know know how I can find out who this person is?
Should I wait to call them after the BK? or should I call them now to find out about my 401K?
Should I just wait to file the motion to value or release the lien after I get some information for the IRS or consult with an attorney now?

[StartingOver08]

Don't wait for them, call the IRS. You might want to have your tax attorney lined up first. Good luck.