When the governmet confers a benefit, it invariably puts conditions on the benefit. Congress will often modify the conditions over time. The result can be a very nuanced set of rules that, to the uninitiated, can seem nonsensical and impossible to descipher. The rules that allow taxes to be discharged in bankruptcy fall into this…
Category: Tax Debt
About tax debts, including settlements, payment agreements, and more.
Is Homeless a Requirement for an IRS Payment Agreement?
Indifference. It is generally defined as “lack of interest, concern, or sympathy.” Those who are unfortunate enough to work with the government employees to resolve a case or matter often have a profound understanding of this term. This is true of just about every government function–be it local, state, or federal. When it comes to…
IRS Ignore Your Offer in Compromise? What’s Next?
The IRS offer in compromise program provides taxpayers with a remedy for settling back taxes. It can provide taxpayers with a much-needed fresh start. Congress has changed the rules for offers. One change is that offers are deemed accepted if the IRS does not reject them within two years. This raises the question of how…
IRS Can Avoid Bankruptcy Collection Hold
One of the benefits of filing bankruptcy is that creditors are precluded from taking collection actions. When a taxpayer who owes unpaid taxes to the IRS files for bankruptcy, this collection hold applies to the IRS. But what if the IRS could simply file a motion and avoid the collection hold? This is exactly what…
Settling Unpaid Taxes With Sporadic or Seasonal Income
Sporadic or seasonal income can make it difficult to settle back taxes with the IRS. For example, if you have a large one-time payment that is not likely to continue, can the IRS consider this in evaluating how much you can pay the IRS? The court addresses this in Margolis-Sellers v. Commissioner, T.C. Memo. 2019-165…
Setting Off a Non-Tax Debt Owed by the IRS
If you owe back taxes but the Federal government owes you for some other matter, can the IRS offset the unpaid taxes with the amount the government owes you? The answer is more complex than one would think. The court addresses this in Tartt v. Commissioner, T.C. Memo. 2019-112. Facts & Procedural History The taxpayer…
IRS Tax Debts from Retirement Account Distributions
Retirement account distributions typically trigger sizable tax liabilities. These liabilities often go unpaid, which results in unpaid tax debts and IRS collection enforcement actions. With careful planning, sometimes these taxes can be avoided. Tax on Retirement Account Distributions Most distributions from retirement accounts trigger income taxes. This includes distributions from IRAs and 401(k)s. The idea…
IRS Pursuit of Additional Taxes After Bankruptcy
One of the benefits of bankruptcy is that it provides some certainty as to what is owed. If successful, the bankruptcy process can provide debtors with a fresh start. But things get complicated when taxes are involved. The recent Breland v. Commissioner, 152 T.C. 9 (2019), case provides an example whereby the IRS was allowed…
IRS Payment Agreement & Spendthrift Trust Distributions
The IRS generally cannot reach funds in a spendthrift trust to satisfy the trust beneficiary’s unpaid tax debts. But can the IRS factor in trust distributions in calculating how much the taxpayer can pay under an installment agreement? The recent Melasky v. Commissioner, 151 TC 9 (2018), suggests that the IRS can do this but…
Discharging Unpaid Taxes in Bankruptcy
There are circumstances when unpaid taxes can be discharged in bankruptcy. There are a number of rules involved. They all hinge on whether a tax return was filed. The recent United States v. Mayer, No. 16-626-RGA (D. Del. 2018), case provides an opportunity to consider these bankruptcy-tax rules. Facts & Procedural History The case involved the taxpayer’s…