Bankruptcy Tax:

Bankruptcy tax refers to the income tax payable by a person who has filed for personal bankruptcy under personal bankruptcy law. A majority of individuals is of a view that the income tax payable, by a person going for bankruptcy under personal bankruptcy law, is waived by law. This thinking is absolutely wrong as the person going for personal bankruptcy under personal bankruptcy law has to discharge his tax liabilities towards the state along with his other liabilities payable to his creditors.

However, personal bankruptcy law gives some relief to the person going for bankruptcy in regards of his tax liabilities payable to the state or federal government. This relief given to person, who has filed a petition for personal bankruptcy, is commonly known as bankruptcy relief. Thus, bankruptcy relief is an important factor that provides a reasonable solution to the tax problems faced by the person going for personal bankruptcy.

The law has provided dimensions to resolve the issue of bankruptcy tax in a situation where a person filing for personal bankruptcy is liable to pay the tax. The laws and the regulations that are made to resolve the bankruptcy tax issues are quite complex and hard to generalize. These laws deal each individual case differently. The application of these laws depends on the facts and circumstances of each individual applicant. The only generalization that could be made of these laws is that the past taxes of prior years could be waived or discharged subjects to the conditions, but the new or the recent taxes could not be discharged.

The waiver or discharge of a bankruptcy tax is merely dependent on certain important dates that are considered by law before discharging a bankruptcy tax. These dates include the last date on which the person was due to file a tax return, the date on which the tax payer actually filed the return, and the date on which the filed tax return was actually assessed by the tax authorities.

The bankruptcy relief brings certain benefits and advantages to the person who has filed a petition for bankruptcy under personal bankruptcy law. However, it is governed by several laws which are extremely complex and hard to understand by a normal person applying for personal bankruptcy.

This brings tax and bankruptcy lawyers into play who have the required expertise and the experience to deal with such cases and who understand the related laws better than anybody.

Thus a person should consult bankruptcy or tax lawyers in order to get the bankruptcy relief. A person who has filed a petition for personal bankruptcy under personal bankruptcy law should consult professional tax and accounting organizations about the discharge of taxes in bankruptcy and the treatment of federal tax liens and levies in the bankruptcy process.

If a person filing for bankruptcy have a federal tax lien filed against him, it is imperative that he should seek knowledgeable tax and legal counsel that could help him in dealing the issue and that can put up his case in a prudent and professional manner.

This is an Original Article written by the DefeatBankruptcy.org Staff
and may not be reprinted in any form without prior written approval.