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Taxes and Bankruptcy

Learn how bankruptcy can help relieve your tax debt and how your tax refund is treated in bankruptcy.

Learn what to look out for if you have tax debts and how to eliminate old tax debts by filing bankruptcy. Plus, learn how to protect your tax refund.

This page is your home base for learning about all things taxes.

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Dealing With Tax Debt In and Out Of Bankruptcy

Written by Attorney Andrea Wimmer
Updated December 4, 2020

While bankruptcy isn’t always the best solution, discharging an old tax debt through Chapter 7 bankruptcy or paying it off through a Chapter 13 bankruptcy is possible.

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What Happens to My IRS Tax Debt if I File Bankruptcy?

Written by Attorney Jonathan Petts
Updated April 12, 2022

The most common of all of debts owed to the IRS is unpaid income taxes, sometimes called back taxes. Chapter 7 bankruptcy is an option if your tax debt meets certain requirements.

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Frequently Asked Questions About Bankruptcy and Tax Refunds

Written by Attorney Andrea Wimmer
Updated October 30, 2020

It's pretty well-known that tax debts typically can't be discharged in bankruptcy. But what if you're getting a refund? This article answers some of the frequently asked questions about tax refunds and bankruptcy.

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What Happens to Your Tax Refund in Bankruptcy?

Written by Kristin Turner, Harvard Law Grad
Updated February 16, 2022

When tax season comes, many individuals filing for bankruptcy expect to receive a tax refund. But can you keep that refund? Generally speaking, any portion of the tax refurn you earned for work you did before filing bankruptcy will be part of your bankruptcy estate and belong to your trustee. That is, unless it's protected by an exemption. This article will explain more.

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How do I find out if I'm required to file taxes?

Written by Kristin Turner, Harvard Law Grad
Updated April 12, 2022

Federal Taxes: All taxpayers are eligible to claim a standard deduction from their taxable income. This amount is based on your filing status and household size. State Taxes: If you are required a Federal Tax return, you usually need to file a state tax return as well.

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Should I Estimate My Income if I Haven't Filed Taxes Yet?

Written by Attorney Jonathan Petts
Updated August 22, 2021

If you do not have official tax documents, it is OK to estimate your gross income on your bankruptcy forms. To estimate your income accurately, look at your most recent pay statement and use it to find your year-to-date gross (before taxes) income.

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Should I File My Taxes After My 341 Meeting?

Written by Attorney Jonathan Petts
Updated November 18, 2021

It doesn't matter if you file your taxes before or after your 341 Meeting. If you're entitled to receive a tax refund, you may have to turn all or some of it over to the trustee even if you file your taxes after the creditors' meeting.

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Where Can I Get Taxes Done for Free?

Written by Kristin Turner, Harvard Law Grad
Updated January 26, 2022

If you need help filing your taxes, the IRS has free tax help centers available.

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Can I Request a Tax Transcript From the IRS?

Written by Attorney Jonathan Petts
Updated January 26, 2022

You can order your tax transcript if you don't have your return by going to the IRS website.

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Can You File Bankruptcy if You Haven't Filed Tax Returns?

Written by Kristin Turner, Harvard Law Grad
Updated August 20, 2021

To file bankruptcy, you'll need to have filed your last two years of tax returns if you were employed and required to do so. If you weren't employed or required to file taxes, you don't need to worry about filing tax returns before filing bankruptcy.

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Should I Inform My Tax Preparer About My Bankruptcy Case?

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated November 18, 2021

Yes, you should tell your tax preparer about your bankruptcy filing. Your bankruptcy trustee may need to give you special instructions that your tax prepare will need to follow if you're getting a refund check. You tax preparer will need to know about this before they file your return.

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What Is a Tax Return?

Written by Attorney Karra Kingston
Updated November 16, 2021

It is important to take all the necessary steps to make sure that you have copies of your tax returns or transcripts when you file for bankruptcy. Your tax returns will give the Bankruptcy Court and your Trustee an idea of your financial history. To ensure your bankruptcy case goes smoothly make sure to locate copies of them before filing your bankruptcy case, so you don’t have to rush later.

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Tax Credits and Bankruptcy

Written by Attorney Eva Bacevice
Updated July 22, 2020

Tax credits reduce the total tax owed by the individual or family claiming the credit. Many low-income families have all or a portion of such a tax credit refunded to them once their tax return is filed and their eligibility to claim the credit confirmed by the Internal Revenue Service. This article will review some of the most commonly used tax credits available to low-income individuals and how these credits are treated in a Chapter 7 bankruptcy.

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Timing Considerations If Student Loan Company Takes Your Tax Refund

Written by Attorney Andrea Wimmer
Updated September 3, 2020

There are not many creditors that can withhold, or set off, your tax refund before it ever hits your bank account. The most common instance of this is when the IRS keeps your refund and applies it to a prior year's balance owed. But that's not the only time this can happen. Another reason for the federal government to withhold all or a portion of your tax refund is if you're in default with federal student loans. Since student loans aren't automatically discharged in bankruptcy, this can be a blessing in disguise. However, timing matters, and depending on when your tax refund was taken by the government, you may be better off waiting a bit to file your bankruptcy case.

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Can a Married Person File Taxes Without Their Spouse?

Written by Attorney John Coble
Updated August 7, 2020

A married couple filing income tax returns can choose to do so married filing jointly or married filing separately. In the past, the primary reason for filing separate tax returns was to shield one spouse from the tax liability of the other spouse. Couples filing separate returns paid much more in income taxes than couples filing joint returns. Today, with tax law changes, there are situations where filing separately can result in a lower combined tax burden.

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How IRS Wage Garnishments Work

Written by Attorney John Coble
Updated March 31, 2022

If you owe back taxes and haven’t made a plan with the IRS to pay them, the IRS can levy your wages or bank account or record a lien against your property. This means the IRS can take money directly from your paycheck or bank account. You can stop a levy by setting up a payment plan with the IRS. If the tax debt meets certain requirements, you can also discharge it in Chapter 7 bankruptcy.

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Tax Refund Offset and Timing a Bankruptcy Case

Written by Attorney John Coble
Updated August 12, 2020

There are several different federal, state, and local government agencies that can intercept your federal tax refund if you owe money to these agencies. This procedure is known as a tax offset. This article will look at which agencies can take your refund and how bankruptcy can help you with tax refund offsets.

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Tax Refunds and Bankruptcy Exemptions

Written by Attorney Andrea Wimmer
Updated April 19, 2022

Tax refunds can be used to pay creditors if they're not protected by an exemption. This is an overview of states with no or little protection for tax refunds.

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Can the IRS Take Your Home?

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated November 6, 2021

The short answer is yes, legally the IRS can take your home. But it’s important to remember that as a taxpayer, you have options. This article explains how the IRS goes about taking someone’s home, and what you can do to stop it from happening to you.

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What Is The IRS Statute Of Limitations?

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated October 1, 2021

Most people in the United States have to deal with tax issues at least once in their lives. If those tax issues lead to tax debt, generally, the IRS has 10 years to collect it. The 10 year period starts with the filing of the return or assessment by the IRS. However, there are a few situations that can pause this 10-year period, which gives the IRS more time to collect.

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Using an Offer in Compromise to Settle a Tax Debt

Written by Attorney Serena Siew
Updated May 3, 2021

An Offer in Compromise is a good choice when there's a large debt covering more than one tax year. The IRS will only consider an offer if you meet all the eligibility criteria and the IRS finds that making you pay your entire tax burden would cause extreme financial hardship.

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Filing a Late Tax Return To Claim Your Refund

Written by Attorney John Coble
Updated March 31, 2022

You can file a late tax return to claim your refund as long as the return is filed no later than 3 years after the due date of the return. If you have withholdings on your paycheck, there's a good chance you have a refund due. Even if nothing was withheld from your paycheck, there's a chance you have a refund due through "refundable tax credits."

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How to File a Form 1040-V Payment Voucher

Written by Attorney John Coble
Updated June 5, 2021

IRS Form 1040-V is a payment voucher that taxpayers often send when submitting payments to the Internal Revenue Service. This form shows the amount they're paying. This article will explore when to use a 1040-V, exactly how to fill out a 1040-V, and alternative payment options that don't require a 1040-V.

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What Is an IRS Collection Due Process Hearing?

Written by Attorney John Coble
Updated June 5, 2021

When the IRS attempts to levy or place a lien on your property, you have the right to a collection due process (CDP) hearing. If you're like most people, you're panicking. Take deep breaths. This article explains the rights you still have and how you can avoid enforcement of the lien or levy.

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How Do I File Back Taxes?

Written by Attorney John Coble
Updated October 1, 2021

There's a way you may be able to make more money while in quarantine. By filing old federal income tax returns, you may be able to claim tax refunds you didn't know that you are entitled to.

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14 Tips if You Haven’t Filed Taxes in Years

Written by Attorney John Coble
Updated June 7, 2021

If you haven't been filing your federal income tax returns, it's a good thing you’re here! If you haven't been filing your tax returns for years, you could avoid a lot of trouble with the IRS by filing these old returns. This article will discuss why you should file your unfiled tax returns along with tips for the best way to file these old returns.

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Can I Settle My Tax Debt With The IRS For Less?

Written by Attorney Curtis Lee
Updated June 15, 2021

Few debts are as difficult to deal with as back taxes, so it’s sometimes surprising to learn that there are several methods available to reduce your tax liability with the IRS for less than what you owe. This article will explain what these options entail, how they work, and other information to help you decide if they’re options that you should consider when dealing with your tax bill.

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What Happens If I Don’t File Tax Returns?

Written by Attorney Kimberly Berson
Updated June 7, 2021

What happens if you can’t file tax returns by the filing deadline? This article discusses how failure to file tax returns by the filing deadline can create a costly tax situation. It will also offer guidance for those who have already missed a critical deadline.

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What Happens If I Can’t Pay My Taxes?

Written by Attorney Kimberly Berson
Updated October 1, 2021

Tax debt is a debt that keeps growing. The IRS has payment options available for those who are struggling. The quicker you resolve your issues with the IRS, the better off you will be. This article discusses the financial consequences of not paying taxes and tax payment options available to you if you can’t afford your tax bill right now.

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4 Ways To Get "Currently Not Collectible" Status From The IRS

Written by Attorney John Coble
Updated June 21, 2021

If you're granted IRS currently not collectible status, the IRS will no longer try to collect taxes from you via bank account levies, wage garnishments, or seizures of your other property. If you can't afford to pay anything toward your IRS tax debt, you'll need to request CNC status. Otherwise, you could see your paycheck garnished or have funds in your bank account taken from you due to a bank account levy.

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Offer in Compromise vs. Bankruptcy: Which Is Better?

Written by Attorney John Coble
Updated June 21, 2021

When deciding whether to file bankruptcy or try to do an offer in compromise to deal with your tax debt, there are many variables to consider. You’ll have to consider what you can afford and the probability of a case being accepted and being completed.

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How Partial Payment Installment Agreements Work

Written by Attorney Paige Hooper
Updated June 28, 2021

Owing a lot of income tax debt often feels inescapable, and the Internal Revenue Service (IRS) can seem intimidating. Fortunately, the IRS has many options available to taxpayers who can’t pay all their taxes right away and will usually work with you to find a solution. This article takes a closer look at how the partial payment option works, how it compares to other solutions, and whether it may be a good choice for your situation.

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How to File Form 433-A

Written by Attorney Paige Hooper
Updated October 1, 2021

This six-page form provides the IRS with detailed information about your financial situation. This information helps the IRS verify whether you’re eligible for the relief you’re requesting and determine what you can afford to pay. This article will walk you through how to complete the most recent version of the form.

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IRS Wage Garnishment Procedures

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated July 19, 2021

If you owe the IRS unpaid taxes, they might collect on the debt by putting a garnish on your wages and collecting their money directly from your paycheck. Learn about the rules they must follow when garnishing wages, including how much of your income is exempt from garnishment and how much notice they are required to give you. Also, find out what you can do to stop a wage garnishment that's already in place.

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What Is Form 656 And How Do I File One?

Written by Attorney Tori Bramble
Updated August 23, 2021

If you owe back taxes to the IRS, the offer in compromise (OIC) program could help you settle your tax debt by paying less than what you owe. You’ll have to fill out Form 656 to make an offer in compromise to the IRS, which will include the details of your repayment offer. This article will expand on eligibility requirements for OICs, benefits for low-income filers, how to fill out a Form 656, and what you need to send to the IRS along with the form.

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Tax Lien: What is it and how do I stop one?

Written by Attorney Tori Bramble
Updated August 23, 2021

The Internal Revenue Service (IRS) can file federal liens against taxpayers who owe back taxes. The IRS' ability to freeze a taxpayer’s property is one of the most powerful weapons it uses to force people to pay their delinquent income taxes. Here’s how federal tax liens can affect you, along with some pointers for how to get rid of them.

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How Does a Tax Lien Foreclosure Work?

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated November 29, 2021

Depending on where the property is located, past-due property taxes may lead to a tax lien foreclosure or a tax deed sale. The tax lien foreclosure process includes some additional protection for property owners. But, the bottom line is the same. If your property taxes are delinquent, you could lose your property to a tax lien foreclosure or tax deed sale—even if your mortgage has been paid in full.

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Tax Relief: How To Get Rid Of Back Taxes

Written by Attorney Tori Bramble
Updated January 11, 2022

Many people have experienced financial hardship and have been unable to pay their taxes due to unemployment or reduced work hours during the pandemic, but getting tax relief is possible. This article will discuss whether it makes sense for you to hire someone to help you get tax relief, the kinds of programs the IRS offers to help taxpayers with back taxes, and how bankruptcy plays into tax debt. Read on to see how you may be able to get the tax relief you deserve.

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IRS Payment Plan Installment Agreements

Written by Attorney Tori Bramble
Updated August 23, 2021

If you can't pay in full after filing your taxes, one of your options involves entering into an installment agreement from the Internal Revenue Service (IRS). Installment agreements are payment plans with the IRS that let you pay off your tax debt over a set timeframe. There are many installment agreement payment options available to taxpayers to settle tax debt. In this article, you'll learn about the different payment plans that can help you wipe out your tax debt.

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The 2 Types of Real Estate Tax Sales — Know the Difference

Written by Attorney Curtis Lee
Updated October 11, 2021

A real estate tax sale occurs when a government entity puts a piece of real estate up for sale to recover past-due property taxes the owner hasn’t paid. There are two main types of tax sales: tax lien sales and tax deed sales. There are both state and municipal laws that govern tax sales.

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Can the IRS Take Your Home if You Owe Back Taxes?

Written by Attorney Curtis Lee
Updated October 31, 2021

The IRS can take your home and sell it if you’re behind on your taxes. But before the IRS seizes your home, they’ll often use other tax debt collection tools. These include the federal tax lien, bank levy, or wage garnishment. Because of the time and money it takes to seize and sell a home with a tax levy, it’s usually a last resort for the IRS. Instead, the agency usually starts by using a levy to take cash assets.

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