Bankruptcy wipes out taxes and leaves you with a clean slate.
But somehow, the second biggest myth about bankruptcy is that taxes can’t be discharged. Wrong, wrong, wrong.
The limits on discharging taxes in bankruptcy are few:
- you can’t discharge taxes first due in the last 3 years;
- taxes for years you haven’t filed a return for; and,
- if you’re an employer, taxes you withheld for employees and didn’t pay to Uncle Sam.
That’s it. Like anything in the law, there are details that make for hard reading. But that’s the list.
So, you can wipe out older income taxes, tax penalties, interest, in either chapter of bankruptcy, and, in Chapter 13, tax liens. Also, you can get the IRS to stop garnishing your wages or levying your assets with the automatic stay that comes with bankruptcy.
The hard reading and hidden exceptions is why you need a bankruptcy lawyer experienced with tax issues in you want to wipe out taxes for certain. It’s too easy to make a mistake otherwise.
Or, you can wait for the IRS 10 year collection statue to run out. Or the 20 year statute of limitations on California state taxes.
Which is it going to be?