Connecticut residents who owe back taxes may be able to have an outstanding balance discharged in bankruptcy. However, there are several conditions that must be met for this to be true. Let’s take a closer look at what you should know if you’re looking to eliminate the IRS as one of your creditors.
How old is the debt?
To qualify for a discharge, a debt must be related to a tax return that was due at least three years before the date that you filed for bankruptcy. For example, if you wanted to eliminate an income tax debt from the 2019 tax year, you would need to wait until at least April 2023 to do so. In addition, you must be able to show that the return associated with a given tax year was filed at least two years before filing for protection from creditors. Finally, the tax owed must have been assessed at least 240 days prior to submitting bankruptcy paperwork.
Have you filed all of your tax returns?
IRS tax debts generally cannot be discharged if you haven’t filed a tax return in any of the previous four years. Furthermore, a balance that has been assessed in a tax year for which you haven’t filed a return cannot be discharged for at least two years.
Bankruptcy can’t be used as a tax evasion strategy
If the government has any reason to believe that you’re filing for bankruptcy as a means of committing tax evasion, your case will likely be tossed. The same will also likely be true if you have committed tax evasion in the past. A bankruptcy law attorney may be able to help you determine if your case may be dismissed for any reason.
If you’re looking to eliminate secured and unsecured debts, it may be possible to do so by filing for bankruptcy. An attorney may be able to review your case to determine which type of proceeding may best meet your needs.