Past income tax owed, how is it handled?

[oldrocker]

When I file I will owe the Feds a bunch in income taxes, this year and what I'm still paying on for last year. When I do the means test with what I will owe the Feds on line 44 it says I can file chapter 7.

I guess my question is wether or not this is how my past due income taxes will be handled or is there something else that will be done with it (rolled in with my unsecured debts?)

Wont make an appointment with a lawyer untill my accountant finishes my return so I'm just trying to get a idea on how this works so I can quit stressing about it.

[HHM]

Given how recent these taxes are (this year and last year), they sound like they are non-dischargeable.

[oldrocker]

Yes I understand they are nondischargable, so that means they get absolute priority over my unsecured debts? If the means test says there is no money left over after paying my back taxes that could allow me the chap 7?

[lrprn]

How much do you owe to the IRS?

If you can pay all that you owe off within 5 years, then you might be a candidate for filing Ch 7 first to wipe out the non-secureds, then file Ch 13 to pay off the taxes. Ask your lawyer if this might be an option for you.

Also you can work with the IRS directly to work out a payment plan - see http://www.irs.gov/businesses/small/...108347,00.html. If the amount you owe cannot be paid off even with a payment plan, then you can apply for an offer in compromise to reduce the amount owed - see http://www.irs.gov/businesses/small/...104593,00.html

[oldrocker]

How much do you owe to the IRS?

If you can pay all that you owe off within 5 years, then you might be a candidate for filing Ch 7 first to wipe out the non-secureds, then file Ch 13 to pay off the taxes. Ask your lawyer if this might be an option for you.

Also you can work with the IRS directly to work out a payment plan - see http://www.irs.gov/businesses/small/...108347,00.html. If the amount you owe cannot be paid off even with a payment plan, then you can apply for an offer in compromise to reduce the amount owed - see http://www.irs.gov/businesses/small/...104593,00.html

I will owe about $24000 (for both years combined) when I file my 07 taxes. What would be the advantage of using the 13 for the taxes? In the past I have found the IRS to be pretty nice about setting up payment plans. Though I've never added this big an amount, probably $13000 added to previous balance of $11000. They might be a little pissed.

[lrprn]

I will owe about $24000 (for both years combined) when I file my 07 taxes. What would be the advantage of using the 13 for the taxes?

There are advantages if you have other secured assets that are in payment arrears that you want to protect plus you can pay off $24,000 in five years. Do you have other assets that are in arrears and can you pay off $24K in five years?

[oldrocker]

I shouldn't need to do that then (if I'm able to Chap 7), I'm not behind on anything (yet). But keeping all my debt payments made and a 20% reduction in income last year has left me with no money to pay my taxes (sole proprietor). If I don't break this cycle I just don't see myself getting anywhere but deeper and deeper in this already neck deep mess.

[CATCHMEIFYOUCAN]

That is really tough for you. Especially since they tack on penalties and interest through the course of the year. I had owed the IRS $4000 grand, my monthly payments were $100 a month. I received a letter from them a week later saying I owed $16,000 and that my monthly payments were going to be about $400 a month than. Well, it was a error on their part and my part, but it was resolved and knocked back down to the original debt of $4000. It won't hurt to seek a couple FREE consultations.

Good Luck to you! Catchmeifyoucan

[AMISLANDER]

That is really tough for you. Especially since they tack on penalties and interest through the course of the year. I had owed the IRS $4000 grand, my monthly payments were $100 a month. I received a letter from them a week later saying I owed $16,000 and that my monthly payments were going to be about $400 a month than. Well, it was a error on their part and my part, but it was resolved and knocked back down to the original debt of $4000. It won't hurt to seek a couple FREE consultations.

Good Luck to you! Catchmeifyoucan

I went through a similar issue before I filed...I owed 2002-2004 and they were not dischargeable...I owed almost $20K and had to take it out of my IRA....there was no other choice and NO WAY I could pay off almost $20K in five years ...deal with a bk, job, etc....so I paid before I filed... My payments are currently $125/mo. for tax years 2004/2005 that I'm currently paying on...if you had any tax refund coming, you can give that back to them, plus that "stupid" incentive that will be coming in May...every little thing helps...just do not contact any of those pennies on the dollar people...all they do is make the calls to set up the payment plan with the IRS....and then charge you for their time...

[CATCHMEIFYOUCAN]

I never understood how those companies advertise "the pennies on a dollar thing." I think its just all a scam. Uncle Sam is pretty tough on getting his money! Yeah, if you are expecting taxes they won't even send you the refund, they'll take what you currently owe and apply to your balance, and feel lucky if you get anything back depending on what you owe.

AMIS that really sucks you had to dive into your IRA to pay them back! But one has to do what they gotta do! They say your better getting a loan if you can if you owe the IRS a tremendous amount of money because the penalties and interest can be so outrageous the longer you take to pay it back!

Best of Luck, Catchmeifyoucan

[oldrocker]

That is really tough for you. Especially since they tack on penalties and interest through the course of the year.

The IRS actually offers a pretty good deal on their installment plans. They will accept most any reasonable monthly payment you propose, interest is 5% and .5% penalty. 5.5% is not bad. In my case though I'm adding a right substantial amount to an already substantial sum so I imagine all bets are off.