Bankruptcy and Taxes
Many people believe that taxes are not dischargeable in bankruptcy. However, that is not so. Many taxes are dischargeable in bankruptcy, including income taxes. However, there are three time periods that must pass before income taxes are dischargeable. The principal time period is a period of three years from the date that the taxes were last timely due. After that date passes, all income taxes, all penalties on those taxes and all interest due on those taxes dischargeable in bankruptcy.
Two taxes that are not dischargeable are the trust fund portion of employment taxes and sales taxes. The person who acquires a tax debt for these taxes and cannot pay them in full should seek counsel immediately. It is possible to pay the trust fund portion of the employment taxes by designating the payment. Otherwise the payment will be applied only in part to the trust fund portion.
One of the urgent reasons to seek competent counsel is when a corporation owes employment taxes that it cannot pay. The reason why this is urgent is because the responsible parties need to have a plan in place that will pay them. Inevitably this plan will involve not paying others and because of this, legal advice should be sougnt to ensure that the failure to pay others will not jeopardize the payment of the trust fund.
Also, the trust fund is normally about 2/3 of the total employment tax debt. The trick is to get that paid off FIRST.