Back Taxes Attorney In Miami, Florida
What are taxes that can be dealt with in bankruptcy?
There are several different types of taxes that may be affected by a bankruptcy filing, including property taxes, income taxes, payroll taxes (such as 941 taxes), and sales taxes. Each type of tax is treated differently under federal bankruptcy law. Michael J. Brooks works with individuals in Miami, Florida to carefully review tax obligations and determine how they may be handled in a Chapter 7 or Chapter 13 case.
Property taxes are generally not dischargeable in bankruptcy. If you want to keep your home, delinquent property taxes must be paid. In Florida, when real estate taxes remain unpaid, a tax certificate may be sold. If the taxes continue to go unpaid, the certificate holder can apply for a tax deed, which may ultimately result in the loss of the property. However, if a bankruptcy case is filed before a tax deed is issued, it may be possible to stop that process. Through a Chapter 13 bankruptcy, past-due property taxes can often be repaid over time under a court-approved repayment plan. The taxes must be paid with interest, but the interest rate is typically limited to the rate established when the tax certificate was purchased.
Income taxes—whether owed to the IRS or the State of Florida—may be dischargeable under certain conditions. While the rules are detailed and fact-specific, there are general timing requirements that must be met. Typically, the tax return must have been due at least three years before the bankruptcy filing, the tax must have been assessed at least 240 days before filing, and the return must have been properly filed. If these requirements are satisfied, certain income tax debts may qualify for discharge. However, if a tax lien has been recorded, that lien may remain attached to your property even if your personal obligation to pay the tax is eliminated. Payroll taxes, including trust fund taxes such as 941 employee withholding taxes, and sales taxes collected on behalf of the government are usually not dischargeable. These taxes are treated as funds held in trust and carry different legal consequences.
Because tax issues in bankruptcy depend heavily on specific dates, filings, and recorded liens, a detailed review is essential. Michael J. Brooks provides individualized guidance to clients in Miami, Florida who are facing tax debt and considering bankruptcy. If you are dealing with IRS or state tax problems, contact Michael J. Brooks, P.A.
to schedule a consultation and discuss your options.
Call Michael J. Brooks, P.A. at 305-400-4595 to schedule a consultation with a lawyer today.
When the IRS assesses your tax return, that means that they look at your return, and if it’s correct, that’s the assessment date.
The case law is still emerging on dischargeability of income taxes. If you file your return late, it still may be dischargeable after two years from the time it was filed unless the IRS has filed an income tax return for you. If the IRS has filed an income tax return for any year before you get the chance to file a return, that year’s tax can never be discharged. Therefore, it is always a good idea to file your income tax returns timely even if you don’t have the money to pay the IRS. We still do not know if late filed returns are going to be dischargeable in the future. The United States Supreme Court has only ruled that income taxes are not dischargeable if your return is filed late and the IRS files a return before you do. The outstanding issue is whether an income tax is dischargeable if you file late and the IRS does not file an income tax return for you first. Right now, the answer is that the tax is dischargeable.
941 (employee) taxes
941 taxes are taxes that you withhold for your employee when you pay them. Anyone who has check signing ability on the accounts that pay the employees are liable for the 941 taxes personally. It is very important that you don’t put family members on the account, because even though they don’t write checks, they would still be liable for 941 taxes. When you file for Chapter 13 bankruptcy, you can repay the IRS with no interest, and any penalties would be wiped out. You have up to five years to repay the debt to the IRS in a Chapter 13 bankruptcy. While you are in bankruptcy, the other people who are liable on the debt would still be liable for the accruing interest and penalties.
Sales taxes
Sales taxes are another tax which is non-dischargeable. As we all know, sales taxes are collected by a business when something is sold. When you file for bankruptcy, the interest and penalties stop accruing, and the penalties that have accrued will be wiped out. Interest and penalties on taxes are very high. The best way to repay sales taxes that are owed is to file Chapter 13 bankruptcy which can deal with paying them back fully over time. You can work out a deal with the State of Florida Department of Revenue outside of bankruptcy, but any deal made will not allow you to pay the sales taxes back without interest or penalties.
Frequently Asked Questions
Why are some types of taxes dischargeable and others not?
Sales taxes and 941 taxes are taxes that you collected from other people to pay the Florida Department of Revenue and the IRS, but didn’t. Those taxes will never be forgiven. Property taxes are secured by your home. It’s like a mortgage, and it is actually first in line to get paid. Therefore, property taxes can never be discharged.
If there is a tax lien on my house, can I sell it?
If there is no equity in the house, meaning you will get no proceeds from the sale, you can get an Order from the Bankruptcy Court authorizing the sale without paying the IRS. If there was no equity in the property when your Chapter 13 bankruptcy was filed, a motion to value can be filed, and the lien can be wiped out. If there is equity in the property, and while you are in the Chapter 13 bankruptcy the value of that property increases, you get to keep the increase in equity in the property.
What happens to my business when I owe 941 taxes or sales taxes?
This is a difficult question to answer. If the business has to stay open, if a Chapter 13 bankruptcy is filed, you will be able to continue to operate. The bankruptcy code does not allow a creditor, even the State of Florida or the US Government to prohibit you from making income to pay back your debts. However, because your company is not in bankruptcy, once your Chapter 13 bankruptcy is over, the interest and penalties which have been accruing while you were in Chapter 13 bankruptcy, are still a liability for your company. There are ways to get around that liability, but that will have to be a discussion for each individual who comes in for a free consultation.
Disclaimer: We are a debt relief agency. We are attorneys who help people file for bankruptcy relief under the bankruptcy code.
Have Questions About Bankruptcy?
If you’re considering filing for bankruptcy or simply want to understand your options, Michael J. Brooks, P.A. is here to help. Call 305-400-4595 today to speak with Michael J. Brooks and get clear answers about your rights, the bankruptcy process, and the steps you can take toward financial relief.