ARE income taxes owed to the IRS dischargeable in bankruptcy? What do you think?
Of course, they are dischargeable. There are certain conditions that have to be met but they areindeed dischargeable. Are you kidding me, you ask? No kidding, they are dischargeable.
Client is in his 50s. He migrated by himself first to America, leaving his family behind in his home country. He is a licensed profession in the medical field, so his income has been good. When he has enough saved up, he starts to petition his family here.
First his wife came, then his minor children came, and soon enough his entire family was now reunited with him. The problem is that instead of paying his income taxes to the IRS, he has spent the money to bring his family here. You know, legal and travel fees. Immigration lawyers have to get paid, you know. They don’t work for free after all.
So now, the client owes the IRS $100,000 of unpaid income taxes. He’s made a payment plan with the IRS where he pays $1,500 a month until the $100,000 is fully paid off. It has interest and penalties. Instead of being able to buy a house for his family to live in, he’s paying the IRS. The $100,000 is divided into $40,000 owed in 2014, $30,000 owed in 2015, and $30,000 owed in 2016.
If client filed for Chapter 7, assuming he is eligible, would the $100,000 owed to the IRS be wiped out? Yes, it would. This is assuming the conditions for discharging income taxes are met. What are the conditions? They must be at least three years old and there was no fraud involved, returns were filed at least two years ago, and the tax assessment was made at least eight months ago. These are the general conditions to discharge income taxes.
If the client satisfies all conditions, then the bankruptcy discharge order will wipe out the $100,000. Sometimes, for whatever reason they have, the IRS will discharge $70,000 without any argument but will continue to collect something like $30,000. Why do they do this? I have no idea but when they do so, if the conditions for discharge have been met, then the IRS is illegally collecting the $30K.
Is there a solution? Yes, the client would have to file an adversary case in the bankruptcy against the IRS and have a federal bankruptcy judge determine if all the conditions have been met for the discharge. The IRS will have to respond and argue why they think the conditions have not been met for discharge. There would be a trial and the court will decide based on factual evidence presented by both client and the IRS.
If you need debt relief, please set an appointment and I will analyze your case personally.
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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.
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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South, Suite 10042, Alhambra, CA 91803.
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