IRS Debt and BK

[spearmint]

1. Theoretically, yes, you would need to only wait 2 years.
2. If the IRS filed a substitute for return, then there is already an amount assessed and a tax due, so I doubt there would be any new issues beyond whatever is happening now.

So would it be pretty safe to assume that I am "safe" for two years? If I could do this, it would be the perfect answer for me. The only drawback would be if I find I HAVE to file bankruptcy within those two years, although even if I didn't include the tax debt in the bankruptcy, so long as I pass two years, I assume the IRS would write off the debt. Is this what they do after the time period passes?

Also, why would it be two years and not three years?

[HHM]

If I find I HAVE to file bankruptcy within those two years, although even if I didn't include the tax debt in the bankruptcy, so long as I pass two years, I assume the IRS would write off the debt. Is this what they do after the time period passes?

Not sure how you drew that conclusion?

The answer is no, if you had to file BK prior to the 2 years, the IRS will NOT write off the debt in 2 years from filing the tax return. The IRS has 10 years to collect a tax debt (assuming the return was filed).

[spearmint]

How much tax are we talking about? If it's under $25k,you can probably resolve that on your own, over that amount, IRS rules change dramatically, much harsher than the means test, so representation is an advantage. IRS collection agents will take advantage of you if you let them.

Around 45K but that includes penalties, etc.

[spearmint]

Not sure how you drew that conclusion?

The answer is no, if you had to file BK prior to the 2 years, the IRS will NOT write off the debt in 2 years from filing the tax return. The IRS has 10 years to collect a tax debt (assuming the return was filed).

So, if I file the return and say I wait two years and then file BK, I can get rid of the tax debt (hopefully)?

[HHM]

So, if I file the return and say I wait two years and then file BK, I can get rid of the tax debt (hopefully)?

Probably.

[spearmint]

Would this also apply to state tax debt, i.e. filing the return for that "nasty" year and waiting two years to file BK and hopefully getting rid of the state tax debt, too. My state is not what is listed, by the way.

[HHM]

Again, theoretically yes. But state tax codes tend to have buried in them requirements that tend to obviate the BK code. The recent decisions that effectively made the 2 year rule null were in regard to state tax returns.

[spearmint]

Again, theoretically yes. But state tax codes tend to have buried in them requirements that tend to obviate the BK code. The recent decisions that effectively made the 2 year rule null were in regard to state tax returns.

I did hear that states are worse to deal with than the IRS but thankfully my state debt is much lower - about $7K

[HHM]

Realistically, do you really think you can hold out for 2 years. I doubt it, if you have other creditors coming after you, you probably don't have that kind of time. Not to mention the risk of tax collection.

[spearmint]

I know. I am not sure yet. You might be right, though.

[jetsfan2010]

Ive lived through this nightmare of IRS and state tax debt, and months after discharge, I had about 30 percent of my IRS tax debt survive the BK due to the complicated laws.

[BarkingCat]

I tried to include a link to the guidance HHM is talking about, but apparently I don't yet have enough posts to do that. It's Notice CC-2010-016 and you can find it pretty easily on the IRS web site.

I'm about to start meeting with lawyers and it will be interesting to see what they have to say on this issue. I'm hoping to include IRS debt from late-filed returns, though they were filed six years ago.

[HHM]

I tried to include a link to the guidance HHM is talking about, but apparently I don't yet have enough posts to do that. It's Notice CC-2010-016 and you can find it pretty easily on the IRS web site.

I'm about to start meeting with lawyers and it will be interesting to see what they have to say on this issue. I'm hoping to include IRS debt from late-filed returns, though they were filed six years ago.

Late filed returns are not so much the issue so long as 2 years has passed since you filed the returns and filed BK. The "potential" problem arises when those late filed returns replaced a "substitute for return" filed on your behalf by the IRS. As you noted, the IRS statement generally will allow a late filed return to replace the SFR and the tax debt will be dischargeable, all other rules being satisfied, if the 2 year rule is satisfied.

Here is the link to the IRS Notice (PDF). http://www.irs.gov/pub/irs-ccdm/cc_2010_016.pdf

[Ifonly]

Definitely do not be afraid to talk to your IRS case officer - they are usually quite helpful. And 9 times out of 10, it is ALWAYS beneficial to file a return in place of their filed return. This is how I spend my summers outside of tax season - doing representation work. If you are unsure as to who to use, ask the case officer if they know anyone - they are not technically allowed to give referrals, but if a taxpayer asks, they will give names of accountants who do rep. work - that's how I get half of my cases. Steer clear of the folks you see on the commercials. In case you haven't noticed, Tax Masters is gone. That's because they've been charged with fraud in over ten states. Now there are at least 3 or 4 more of these scavengers popping up in their place. Many of them charge a retainer in the thousands simply for filing a POA with the IRS...and they do nothing else.

[DBnow]

I owe a huge IRS debt, 400K. (2001) When I was a business owner. Car wreck ,brain injury,divorced and now on SSI. Sued ,judgemented and now there reuping for another 10 years. I can't go another 10 years, like the last . Ive been told to file, but I'm poor and don't qualify for any help. I was thinking of doing It online but fear doing it that way maybe a waste of time and not get them all. Any ideas?