IRS , tax question

[lostindebt]

We currently are taxed at a very high level due to our income. The last several years even claming 0 on our paychecks we have still owed a large amount of money.

This year I owed an additional 8,000k in taxes and 3500 of it was to state. I called today to increase our installment agreement payment to incorporate this new amount.

I was told on the phone that after 2 years of back taxes no further installments will be allowed and the agreement will be cancelled if you owe any additional money. Trust me - this year I am going to owe money.

So my question - we plan to file BK in April. If we cease paying cc's in January can I apply the cc payments to my IRS payments instead so that by the time my taxes are due I will have paid off one of the years allowing me to add another year to my installment agreement for 2009?

Also- will the trustee look at this as a "preferential payment"? even though it is the IRS and the money is owed since it is a non-dischargable debt?

Thanks to all!

[StartingOver08]

Yes, you can stop paying cc payments and add that to your tax payments. It is NOT considered preferential as the IRS debt is priority debt.

BTW, once you file BK, your installment agreement will be suspended/canceled for the duration of the BK (in a Ch 7) and you will need to contact the IRS to make a NEW installement agreement after your BK. You do put the entire amount due the IRS in the petition, but as you know, it is not dischargeable if it is less than 3 yrs. (See the IRS sticky by HHM for specific criteria). Of course, in a Ch 13 it is handled differently than in a Ch 7. You can structure your plan so that the payments are applied to your priority debt (and your administrative fees) rather than your regular unsecured debt. If you have significant IRS debt then a Ch 13 becomes more attractive as it stops interest and penalties from accruing ....

[AMISLANDER]

We currently are taxed at a very high level due to our income. The last several years even claming 0 on our paychecks we have still owed a large amount of money.

This year I owed an additional 8,000k in taxes and 3500 of it was to state. I called today to increase our installment agreement payment to incorporate this new amount.

I was told on the phone that after 2 years of back taxes no further installments will be allowed and the agreement will be cancelled if you owe any additional money. Trust me - this year I am going to owe money.

So my question - we plan to file BK in April. If we cease paying cc's in January can I apply the cc payments to my IRS payments instead so that by the time my taxes are due I will have paid off one of the years allowing me to add another year to my installment agreement for 2009?

Also- will the trustee look at this as a "preferential payment"? even though it is the IRS and the money is owed since it is a non-dischargable debt?

Thanks to all!

I've been in a payment plan with the IRS since June 2007. It is past that date & they are still collecting with me, so I am trying to understand what you mean, after two years, they stop billing you?

[lostindebt]

What that means is the IRS state (unsure still of federal) does not allow you to have a installment plan for more than 2 years of owed taxes. In my case I owe 2007 and 2008 and will owe 2009. So I need to pay off 2007 prior to filing 2009.

[HHM]

Whatever the rep told you about not allowing an IRS Installment agreement for more than 2 years of back taxes is false. The problem, however, is that you keep accuring new tax debt each year. That automatically defualts an installment agreement.

You probably need to start making Estimated Tax Payments Quarterly. You will want to reivew IRS Form 1040-ES.

So long as your taxes are "priority taxes" in bankruptcy, which is sounds like they are, you won't have to worry about a preference issue.

On side note, if you make enough money to have 0 withholding and still owe taxes, how are you going to qualify for chapter 7?

[lostindebt]

Whatever the rep told you about not allowing an IRS Installment agreement for more than 2 years of back taxes is false. The problem, however, is that you keep accuring new tax debt each year. That automatically defualts an installment agreement.

You probably need to start making Estimated Tax Payments Quarterly. You will want to reivew IRS Form 1040-ES.

So long as your taxes are "priority taxes" in bankruptcy, which is sounds like they are, you won't have to worry about a preference issue.

On side note, if you make enough money to have 0 withholding and still owe taxes, how are you going to qualify for chapter 7?

Chapter 7 - we have a buisness debt lawsuit for 440,000 on a defaulted commercial lease that was signed with a personal guarantee. Therefore we don't qualify for 13. Plus our business debt is over 50% of our debt. So we don't require the means test. We do however still have to have less than $100 a month disposable income to qualify for 7, regardless of how much we make. So I decided to go back to school , and I am unemployed. Plus with our outgoing allowable expenses and our HUGE IRS back debt payments we should qualify according to our attorney.

[HHM]

Sounds good.

[AMISLANDER]

Gotcha, I don't owe for any other years other than the one I'm paying on; and it's almost payed off, as well. Man, will it be great to have an xtra 125/month in my pocket rather than the IRS's!

[lookingforward]

Why wait until January to stop paying cc bills? Your payments until January could go toward your IRS debt as well. It won't help you to keep paying them until then, it will be like flushing the money down the toilet!