Can I wipe out tax debt in bankruptcy?

You can wipe out some tax debt in bankruptcy depending on the type of tax debt.

Personal Income Taxes

If the tax liability is less than three years old, it cannot be wiped out.  If the tax liability is more than three years old, we may be able to wipe out the debt.  I want to emphasize the words “may be able” to wipe out.  Dealing with IRS taxes is tricky.  An important question that I will ask you is,  “Has any tax lien been filed against you and in which Georgia county was the tax lien filed?”   Tax liens can make your tax liability secured.  IRS tax liens attach to every single thing you own down to your underwear regardless of any state exemption.

The age of the tax debt is determined by the date of the filing of tax return.  As a result, if you have not filed any tax returns for the past five years, none of your tax debt can be wiped out.

Payroll Taxes

Filing bankruptcy in Georgia does not wipe out payroll taxes.  There is no way to get out of payroll taxes other than paying it.

Property Taxes

Property taxes in Georgia attach to house.  If you are planning on keeping the house, you will have to pay the property taxes.  If you are going to surrender the house back to the mortgage, you will not be liable for the property taxes.

Sales Taxes

Small business owners in Georgia who owe sales taxes cannot wipe out their liability in bankruptcy.  There is no way around sales taxes.  A business owner technically holds the sales tax money in trust for the State of Georgia.  Sales tax money should never be spent operating a business.  Sales tax must be paid first.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file in Georgia?

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