Legal Question in Business Law in California

Re: Bankruptcy and taxes

Taxes are frequently NOT dischargeable in bankruptcy. Although your question was asked under the 'Business Law' category, I'm assuming you are asking with respect to an individual, rather than a corporate, Chapter 7 debtor, which would include an individual conducting a sole proprietorship business.

The following taxes are generally NOT dischargeable:

1. Any tax for which the debtor failed to file a return, if required.

2. Any tax the debtor tried to evade.

3. Any tax where the debtor filed a late return within two years of filing the bankruptcy.

4. Taxes on income or gross receipts (a) for which a required return is due within three years of the bankruptcy filing, (b) assessed within 240 days before the bankruptcy filing, or (c) is not yet assessed, but is assessable after filing of the bankruptcy.

5. Property taxes assessed before the bankruptcy and last payable without penalty less than one year before filing of the bankruptcy.

6. Excise taxes due within three years of the bankruptcy; and

7. Taxes that the debtor collects or withholds, such as sales taxes, FICA, employee withholding taxes, etc.

Penalties related to the foregoing are also nondischargeable.

There are numerous technical details which aren't mentioned in this highly abbreviated reply, and if large sums are involved, the debtor should consult his or her bankruptcy attorney.

Re: Bankruptcy and taxes

You already have a prior response, so I will keep mine brief: most taxes are not dischargeable in bankruptcy and you might want to try a compromise BEFORE bankruptcy

Joel Selik

www.taxworkout.com

800-894-2889