Are there any tax implications of declaring personal or corporate bankruptcy?
I’m sharing this information not as an attorney or a tax advisor. I’ve worked with lawyers for over a decade so I’ve seen and heard much, but you should always speak with licensed professionals in your jurisdiction. With that being said, yes, there are tax implications of declaring personal or corporate bankruptcy. Depending on the type of bankruptcy you declare, you may be able to discharge some of your tax liabilities. For example, if you filed for Chapter 7 bankruptcy, you may be able to discharge any taxes owed that are more than three years old. Additionally, if you are filing for Chapter 13 bankruptcy, you may be able to restructure your tax debt and pay it off over a period of three to five years.
However, it is important to note that bankruptcy will not necessarily get rid of all of your tax liabilities. Any taxes owed that are not dischargeable in bankruptcy, such as payroll taxes and taxes related to fraud, will still be due. Additionally, any taxes that have been assessed within the past three years may not be eligible for discharge.
In addition to potential dischargeability issues, there are also other tax implications of filing for bankruptcy. For example, if you file for bankruptcy and have a tax refund coming your way, it may be seized by the bankruptcy court. Additionally, if you are able to discharge any of your tax liabilities, you may be liable for the taxes you discharged through the IRS’s “Fresh Start” program. This program allows the IRS to collect any taxes that have been discharged through bankruptcy for up to 10 years after the filing of the bankruptcy.
Finally, if you are a business owner and file for corporate bankruptcy, you may also be liable for personal taxes related to the business. This is because the IRS sees the business and its owners as one entity, so any taxes related to the business are the responsibility of the owners.
Overall, while bankruptcy can be a good option for some people, it is important to understand the potential tax implications that come along with it. It is important to consult with a qualified bankruptcy attorney to discuss your options and how bankruptcy may impact your tax liability.
If you ever need a Utah lawyer, try this one:
Jeremy Eveland
17 North State Street
Lindon UT 84042
(801) 613-1472
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