bankruptcy

The “What Ifs” for Struggling Taxpayers

Many of life’s events such as losing a job, foreclosure of a home or even forgiveness of a debt impact the payment of taxes. The tax law offers hope in these situations. As an example, if a taxpayer’s income decreases, he or she may be eligible for certain tax credits, such as the Earned Income Tax Credit. In this blog, We will present a list of quick answers to life event situations that have a potential impact on an individual’s tax burden. For more information see our blogs: Part 1 – What If: Job Related Life Events and Struggling Taxpayers; and Part 2 – What If: Debt Related Life Events and Struggling Taxpayers.

Part 2 – What If: Debt Related Life Events And Struggling Taxpayers

If you have any type of financial difficulty, keep in mind that there’s a tax impact to events such as job loss or foreclosure. Such consequences may not necessarily be predominantly negative. For example, if your income decreased, you may be newly eligible for the Earned Income Tax Credit or other tax credits, which is a good thing.

Of the utmost importance when facing some financial obstacle is to contact the IRS immediately if you believe that you may have trouble paying your tax bill. Please see our blog You Can’t Pay Your Tax Bill in Full  You Have Options…An experienced and knowledgeable tax attorney may help ease any financial burden. Remember that to avoid additional penalties, you also should always file a tax return even if you are unable to pay.

What Is A Federal Tax Lien?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:

• Puts your balance due on the books (assesses your liability);
• Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
You:
• Neglect or refuse to fully pay the debt on time.
The IRS files a public document, the Notice of Federal Tax Lien, to alert potential creditors and the public that the government has a legal and enforceable interest in your property.

The IRS Offer-In-Compromise Program – How Does It Really Work?

The IRS Offer-In-Compromise Program – How Does It Really Work?An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. If the tax liabilities can be fully paid through an installment agreement or other means, the taxpayer, in most cases, will not be eligible for an OIC.

In order to be eligible for an OIC the taxpayer must have:

  1. filed all tax returns;
  2. made all required estimated tax payments for the current year; and
  3. made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

Can I Discharge Taxes In Bankruptcy?

Can I Discharge Taxes In Bankruptcy?The ultimate purpose in filing bankruptcy is to obtain a discharge of most, if not all, of your debts. A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts, i.e., the debtor is no longer legally required to pay those debts that are discharged. The discharge is a permanent order which prohibits the creditors from engaging in any and all forms of collection activity on such debts.

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