I owe back taxes, can I bankrupt them?
If you timely filed your taxes and the
taxes are over three years old, then yes. For example, you
filed your 2004 taxes before the April 15, 2005 tax
deadline. As of April 15, 2008, the debt is dischargeable.
However, if you filed for an extension, the period is
extended to three years from the extension deadline. If you
filed a prior bankruptcy, the period is extended by another
90 days. Remember, if you did not file your taxes or filed
them late or the taxes are less than three years old, they
cannot be discharged.
If you owe a substantial tax liability that cannot be
discharged, a chapter 13 plan can be filed to pay the tax
liability under the bankruptcy plan. By doing this, you
have the protection of the bankruptcy court and the IRS
cannot levy property as long as you are making your plan
payments. Keep in mind that the tax liability has to be
paid in full under the three to five year plan.