Despite the popular notion that bankruptcy affects only those people who have low income, there are numerous instances when the rich and the famous had to resort to bankruptcy to get rid of their huge financial debt. One of the notorious cases is that of O.J. Simpson’s lawyer, F. Lee Bailey’s. He gained popularity when he defended O.J. Simpson in the criminal trial for the double murder of Simpson’s ex-wife Nicole Brown and her friend Ron Goldman. Bailey had a brush with success earlier too, representing people in other high profile cases. Unfortunately, despite rubbing shoulder with high placed people, Bailey filed for bankruptcy in Maine to get IRS debts (from 1993-2001 tax returns) to the tune of more than $5 million discharged.
Why is dealing with tax debts difficult?
Dallas based law firm Recovery Law Group elaborates that tax debts are often the most complicating types of debts to deal with. This can be attributed to the fact that similarly to student loan and child and spousal support payments, they cannot be discharged during bankruptcy. You have to pay them off to get rid of them. Since IRS rules are complicated, it is not possible for the average human to get a grasp over them. It is no wonder that people hire the services of specialized people like tax lawyers and accountants to deal with them. In case you receive a notice from IRS regarding any debt you owe you should contact 888-297-6203 for immediate assistance from specialized bankruptcy lawyers. It is important to contact the IRS to inquire about the details before accepting or contradicting them. In case the amount is immense, you need to take steps to fight for your right in the court. If their accusations are true, you need to make arrangements to pay the dues.
Retired F. Lee Bailey had to face lots of obstacles to come up with the million dollars fine. Since he didn’t have that money with him and arranging the huge amount all at once was difficult, he required assistance. In case, you too are facing a similar situation of huge tax debts, a payment plan can be worked out with the IRS. In case, the matter is not handled immediately, action against you can be taken by IRS which may include wage garnishment and/or putting liens on your property. Since you owe the debt to the government, unlike other creditors, it does not require the court’s permission to collect the dues; it can do so as and when it pleases.
Can bankruptcy aid in tax debts?
Many people find bankruptcy a great aid in getting out of bad financial conditions. However, can bankruptcy offer protection in case of taxes owed to the government? Tax debts can be discharged during bankruptcy in certain cases. To get respite from them, you need to meet the following criteria:
- Only Income tax debts can be considered.
- The tax must be due originally at least 3 years prior to a bankruptcy
- IRS assessment of the debt must have taken place a minimum of 240 days prior to filing or they haven’t yet assessed it.
- The tax return for the year in question must be filed.
- No fraud or evasion of taxes must be involved.
Normally, people won’t find the criteria too difficult to meet, as long as the debt is old and no false information is provided. However, if there is a discrepancy in the information provided; like a false name or any money hidden from the IRS, you might have to pay the debt in full, even after bankruptcy. In the case of Bailey, he was accused of not paying applicable taxes as well as hiding money which he earned during his long and distinguished legal career. Disputing the claim has led to a long drawn legal battle which is causing him to infuse more money.
Despite earning huge sums of money during his brilliant career as a successful lawyer, Bailey could not keep himself out of legal trouble due to debts owed to the IRS. In case, you too are facing similar tax-related issues with the IRS, it is important that you get all basic information related to the case and contact a legal expert or an accountant to look into the matter. In case, the debt is too much to be paid and you are already suffering through other financial issues, bankruptcy might be an ideal option. Getting timely professional help can make a huge difference to your bankruptcy case.