Bankruptcy and Taxes

I, Rica Gilmore, have prepared both Bankruptcy and Taxes since before the opening of the business in 1992. As a tax preparer, I will let you know the tax debt issue comes up regularly when preparing a bankruptcy.

As a bankruptcy preparer, I cannot give legal advice regarding the bankruptcy, so I am going to discuss the tax issue here.

I offer a page on various TAX TIPS that come directly from Internal Revenue Service. This gives you an edge by having knowledge directly from the source.

Become your own tax expert = keep up with our TAX TIPS by subscribing to our blogs.

Start your tax return with our experienced company. I have been preparing since 1991 and specialize in small business. Simply enter your information. Unlike automated programs, I take your entries and enter it into the program, so I will verify all your entries to ensure accuracy.

Become your own tax expert = keep up with our TAX TIPS by subscribing to our blogs.


There are a five ways to work with IRS when it is impossible to pay.

You can arrange on your own or through our office for a monthly payment plan. This will assist you in paying your IRS debt off in a cooperative manner. If you would like us to prepare this for you, please contact me at 916-628-2846. We will assist in the calculations. Fill out Form 9465, Installment Agreement Request.

We can also assist with a second payment installment agreement that allows for payments on a partial amount owed. If you would like us to prepare this for you, please contact me at 916-628-2846. We will assist in the calculations. Fill out Form 433-A, Collection Information Statement. Use Form 433-A Worksheet to calculate your payments or have us do it for you.

We also help prepare the Offer In Compromise Option which may result in a smaller amount due, but usually will require the payment to be paid off quicker.

A very simple one that you do not need my help for is the Non-Collect Status. Just call IRS at 1-800-829-1040 and let them know you need to speak to someone in collections. They are very polite and understand you are not trying to avoid or get out of paying any of your taxes, but just cannot do so at this moment. I would recommend anyone, even if you are trying to use other methods, handle this right away if you can qualify.

Bankruptcy!! The main purpose of this site. There such strict rules under this method that I have a special section below. You may already have completed this with our office or somewhere else, so you may want to know what you still owe. You also could be research what to do before you file. Please review the section of what survives bankruptcy.

BEFORE filing it is a great idea to discuss with a bankruptcy or tax attorney what taxes will be discharged and what ones of your particular case will survive. You can also research this yourself as is reflected below. I have really found tax attorneys are a great source of information.


This is found many places on the web at no charge to you. A simple search of "what taxes are discharged in bankruptcy" should provide a very simple guide. If the site confuses you, find another. Most write it out very simple.

An example of this can be found at Nolo

An exact quote from their site is as follows and all credit goes to them. Please review some of their books and information at the link that follows when you have spare time.

"When You Can Discharge a Tax Debt

You can discharge (wipe out) debts for federal income taxes in Chapter 7 bankruptcy only if all of the following conditions are true:

The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy.

You did not commit fraud or willful evasion. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, such as using a false Social Security number on your tax return, bankruptcy can't help.

The debt is at least three years old. To eliminate a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy.

You filed a tax return. You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.

You pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity because of an offer in compromise or a previous bankruptcy filing.)

You Can't Discharge a Federal Tax Lien

If your taxes qualify for discharge in a Chapter 7 bankruptcy case, your victory may be bittersweet. This is because bankruptcy will not wipe out prior recorded tax liens. A Chapter 7 bankruptcy will wipe out your personal obligation to pay the debt, and prevent the IRS from going after your bank account or wages, but if the IRS recorded a tax lien on your property before you file for bankruptcy, the lien will remain on the property. In effect, this means you'll have to pay off the tax lien in order to sell the property."

Find more information and valuable deals on books at Nolo Offers and Deals


This website contains information related to law and is NOT LEGAL advice. It contents is for information only. If you need legal advice, please consult an attorney or act as your own.
All documents typed are prepared by Rica Gilmore.

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