How Can I Discharge Tax Debt?

When an individual is contemplating filing for bankruptcy he or she will most likely wonder how their bankruptcy and tax issues may overlap and what can be done to discharge certain tax debt. In New Jersey, typically, there are two methods for minimizing or discharging income tax debt. One way is through an Offer in Compromise and the other method is by filing for bankruptcy with the appropriate court. An Offer in Compromise is a very complex and arduous process through which a debtor may lower their tax debts. In order to obtain an Offer in Compromise a debtor must complete an application and submit an exhaustive list of documents and other information that reflects the debtor's present assets, expenses, and income to a tax agent to determine the debtor's ability to pay. As part of the process, the debt is required to present an offer suggesting a resolution to the tax debt problem and select a repayment option. Ultimately, the end result is completely subject to the discretion of the tax agent that is assigned to the debtor's case and therefore it is impossible to predict the end result before the process begins. Bankruptcy is a process that is bound by federal bankruptcy laws and will result in a determination of which tax debts can be discharge and which cannot. This determination will be based purely on the existing laws found in the U.S. Bankruptcy Code. Generally, these laws will dispose of a debtor's tax debt based up on their tax filings by year. For instance, a debtor may be able to discharge their tax debt liabilities for 2008 but not for 2013. In contrast to the Offer in Compromise, the bankruptcy process does not allow for the debtor to negotiate for any specific discharges because, as was previously stated, the proceedings are completely guided by federal bankruptcy codes. A debtor who chooses bankruptcy as the method to reduce or eliminate tax debts will generally know before the process begins which, if any, of his tax debt is dischargeable through the process by consulting with an experienced tax attorney who is familiar with the Bankruptcy Code. If you are having trouble dealing with your consumer debt issues, you need to know how your bankruptcy and tax issues affect each other or what your options are with regard to discharging tax debt, it is critical that you seek the advice of experienced legal counsel to advise you on these issues. For more information regarding bankruptcy and tax issues, Chapter 13 bankruptcy, Chapter 7 bankruptcy, foreclosure or any other consumer debt issues visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.