Taxes and Bankruptcy? ... priorities?

[quest42]

What is the name of your state? California

I understand that tax debts cannot be discharged in a bankruptcy, but an Offer-In-Compromise with the IRS may be helpful... my net worth is negative, and my current income is below the poverty level!

My Questions:

If I have not yet filed a tax return for a prior year, MUST I do that BEFORE I can file for bankruptcy, or are these two issues completely independent of each other?

With the OCTOBER 17 deadline approaching rapidly, I think I should file for bankruptcy FIRST, and then deal with my IRS issues ASAP after I have filed. (Yes, I am a financial train-wreck now, but MUST work through all this... with no funds and no attorney!)

Any comments?

Here's my current plan:

1. File for Bankrtuptcy NOW
2. File past year tax return ASAP (I have NO funds to pay taxes, but must file anyway...)
3. Do offer-in-compromise with IRS

Is that plan sound?

 

[Ladynred]

MUST I do that BEFORE I can file for bankruptcy,

No, but the Trustee may require that all tax returns be filed by a certain date, probably before your 341 meeting.

SOME taxes can be discharged, but the returns have to have been FILED and the taxes due have to be at least 3 years old.

 

[giggle50]

The new bankruptcy law has a lot of new requirements regarding the presentation of tax returns to the court.

Your plan will work fine until October 17. File now and there should be no problem with getting your taxes filed in the 30 to 40 days before your hearing.

 

[quest42]

Thanks for your help!

One more question...

Tax year 2000... I never filed, I had no money to pay the taxes due... I have been insolvent since then... I have a letter from the IRS assessing me over $20,000 for that year, and California for over $2,000. No way to pay... unemployed... penalties have mounted up...

I read that only taxes filed at least one year BEFORE bankurptcy is filed can be discharged. Since I have not yet filed, but have been assessed over two years ago by the IRS and State... can these 2000 taxes due be discharged or reduced by bankruptcy?

Is it up to the discretion of the court?

 

[Ladynred]

can these 2000 taxes due be discharged or reduced by bankruptcy?

No, those taxes are NOT going to be discharged because you didn't file the required returns.

The sooner you file the return the better. When the IRS doesn't get a return, they file one FOR you and it has NONE of the deductions you would normally have for taxes paid etc. Once YOU actually FILE the right return - and you CAN still get the forms for 2000, then that tax due number will go down. You'll still be stuck with penalties, but you should have at least FILED the return. I suggets you find yourself a taxpayer advocate and see what can be done.