Due to the current state of the economy, more individuals and businesses are finding it difficult to pay their taxes. If you have exhausted all available appeals with the taxing authorities or been denied for an offer in compromise, you may want to look at your bankruptcy options. This is especially true if you have been subject to a tax levy on accounts or property.
A discharge in Chapter 7 bankruptcy only discharges certain older taxes (more than three years must have lapsed since the return was due and the return must have been filed two years prior to the bankruptcy filing). The tax must not have been assessed within 240 days of the bankruptcy filing and the tax return must not be fraudulent. Some taxes are nondischargeable in bankruptcy no matter how old they are, including trust fund, withholding, and sales taxes.
If you owe very recent taxes or taxes that are nondischargeable like trust fund taxes, then Chapter 13 or Chapter 11 may be ideal. In Chapter 13 (individuals and sole proprietors only), a five- year repayment plan is proposed to pay priority taxes in full. If you are not eligible to file Chapter 13 due to debt limits or corporate status, then Chapter 11, which is very similar to Chapter 13, will enable you to develop a five- year plan to pay priority taxes in full.