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Should you file bankruptcy for your tax debts?

On Behalf of | Sep 12, 2020 | Bankruptcy

One of the most difficult things about being a self-employed entrepreneur is the debt that often comes with it. It can be hard to pay back tax debts, especially if the job market isn’t good and you can’t make your typical sales.

Some business owners struggle and end up missing payments, but that’s bad for the business. They may start cutting corners and stop saving for taxes to make ends meet, but at the end of the day, the debts just shift. Instead of having debts to creditors, they now owe the Internal Revenue Service money.

Bankruptcy is one thing that many people believe would work for them, but the truth is that bankruptcy won’t usually discharge tax debts. The good news is that you may be able to get your taxes discharged in some rare cases, such as if you are dealing with undue hardship.

How do you get tax debts discharged?

To get your tax debts discharged, you’ll have to prove undue hardship. For example, undue hardship might be useful if you’ve lost your business in a natural disaster or have been severely injured or disabled. 

What if your taxes can’t be discharged?

Even if your taxes can’t be discharged, there may be options available to help you pay them back. In some cases, you can negotiate down the amount you owe, too. Payment plans are common, and they could help reduce what you owe each month. 

Your attorney can talk to you more about your specific case and if you have a chance to claim undue hardship. If so, you may be able to get your taxes forgiven. 

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The Law Office of Kim Covington, is a woman owned debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 24 years.