Phone Call Us 414-326-9231
Toll Free 866-678-9352
Text Us 414-277-7742

What to do if you can't afford to pay your income taxes

This Wednesday is Tax Day, and if you are dreading another year that you are unable to afford the taxes that you owe, there are several options available to you, so don't panic.

As the IRS explains on its website, people who cannot afford to pay past due federal income taxes have a variety of options that they should consider, including bankruptcy. 

People struggling with tax debt and other forms of debt may choose one of two bankruptcy options: Chapter 7, which involves liquidation of some of your assets and then a discharge of your debts; or Chapter 13, which involves creating a payment plan to repay part or all of the debts you owe over three to five years.

If you are leaning toward a Chapter 7 bankruptcy to have your tax debt forgiven, you should know that most tax debts cannot be forgiven in bankruptcy; however, there are some that can be when certain conditions are met.

In order for tax debt to be dischargeable in bankruptcy, you:

  • Must have tax debt made up of income taxes (not payroll taxes or tax penalties);
  • Must have tax debt that is at least three years old;
  • Must not have committed tax fraud or evasion;
  • Must have filed a tax return for at least two years before filing for bankruptcy protection; and
  • Your income tax debt must have been assessed by the IRS at least 240 days before filing for bankruptcy protection.

If you think that Chapter 13 might be the better option for you, consider the following requirements:

  1. You must file tax returns for all tax periods within the four years leading up to your bankruptcy filing.
  2. You must continue to file tax returns during your bankruptcy process, or get an extension from the IRS.
  3. You must pay all taxes that you are assessed when they come due during the bankruptcy process.

Failing to file your tax return or pay your taxes during the bankruptcy process could put a stop to your bankruptcy case.

If bankruptcy doesn't seem like the right option for you, there are a couple of alternative ways to deal with tax debt that you cannot afford to pay back, including an IRS payment plan or an Offer in Compromise.

Talk to an experienced bankruptcy lawyer in your area for help choosing the right option for you.

No Comments

Leave a comment
Comment Information

Contact Our Milwaukee Law Firm

Reach Miller & Miller Law, LLC, online or call us at 414-326-9231 to schedule a free initial consultation. Our law office also provides Spanish language services. Se habla español.

To schedule an initial consultation, call 414-326-9231 or contact Miller & Miller today.

Free Case Evaluation

* indicates required field

Milwaukee Office
633 W Wisconsin Ave, Suite 500
Milwaukee, WI 53203

Phone: 414-312-6581
Fax: 414-277-1303
Milwaukee Law Office Map

Kenosha Office
6123 Green Bay Road
Suite 210
Kenosha, WI 53142

Phone: 262-326-1669
Kenosha Law Office Map

Brookfield Office
200 S. Executive Drive
Suite 101
Brookfield, WI 53005

Phone: 262-261-0665
Brookfield Law Office Map

Madison Office
2810 Crossroads Drive
Suite 4001
Madison, WI 53718

Phone: 608-260-7133
Madison Law Office Map

Glendale Office
6001 N. Green Bay Avenue
Glendale, WI 53209

Phone: 414-973-8662
Glendale Law Office Map