A common misconception people have is that if they haven’t filed taxes in over 10 years, they can file for bankruptcy and not be held responsible for their unpaid taxes. That is not the case. Filing for bankruptcy does not guarantee that your taxes will be discharged, and it can complicate the process of getting back on a positive financial track.
Can Past Due Taxes Ever Be Discharged in Bankruptcy?
The answer to this question is, "It depends." If you have not filed a tax return, your past due taxes cannot be discharged in bankruptcy. Only those taxes that have been filed and are older than 3 years can be dischargeable in bankruptcy, unless the tax return was filed late.
Additionally, you are still required to keep up with your current taxes, even after filing bankruptcy. According to the IRS, “Failure to file returns and/or pay current taxes during your bankruptcy may result in your case being dismissed.” So, if you don’t file your taxes on time, you will still be held responsible for those taxes, even if you declare bankruptcy.
Don’t Get Behind on Your Taxes
Avoid getting yourself into a situation where your taxes are overdue. There are many unintended consequences of delinquent tax returns, and filing for bankruptcy won’t get you out of paying what you owe. The best thing you can do to protect yourself is to stay caught up on your taxes.
Larry Bradford, CPA, can help you get caught up on past due taxes and create a plan to ensure you don’t get behind on your payments in the future. Call our office today at 512-402-0049 or send an email to firstname.lastname@example.org to set up an initial appointment.