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What is Tax Discharge?

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What is Tax Discharge?

Tax discharge is the process by which certain types of tax debt are eliminated or wiped clean, providing individuals and businesses with a fresh financial start. It’s like hitting the reset button on your tax obligations. However, not all tax debts are created equal, and not all can be discharged.

Eligibility for Tax Discharge

Tax discharge eligibility is determined by various factors, including the type of tax debt, the timing of the debt, and the taxpayer’s specific circumstances. Generally, the following criteria may make you eligible for tax discharge:

  1. Insolvency: If your total debts exceed the value of your assets when the tax debt was incurred, you might be considered insolvent. In such cases, you could qualify for tax discharge.
  2. Canceled Debt: If you had a debt canceled or forgiven by a creditor, the amount forgiven may be eligible for tax discharge. However, this doesn’t apply to all types of canceled debt.
  3. Bankruptcy: When you declare bankruptcy, certain tax debts may be dischargeable, depending on the type of bankruptcy filed and the specific tax obligations.

Non-Dischargeable Tax Debts

Not all tax debts can be wiped away with tax discharge. Some obligations are considered non-dischargeable, such as:

  • Recent income tax debts (usually within the last three years).
  • Fraudulent tax returns.
  • Deliberate tax evasion.
  • Certain payroll tax debts.

It’s crucial to understand which of your tax debts are dischargeable and which are not before pursuing this option.

Navigating the Tax Discharge Process

Steps to Achieve Tax Discharge

While the tax discharge process can be intricate, these steps will give you a broad overview of what to expect:

  1.  Assess Your Eligibility: Determine if you meet the criteria for tax discharge, considering factors like insolvency, canceled debt, or bankruptcy.
  2. Seek Professional Guidance: Consult with experts like Priority Tax Relief to assess your situation and develop a strategic plan.
  3. Prepare Documentation: Gather all necessary financial documents, including records of your debts and assets.
  4. File the Appropriate Forms: Depending on your situation, you may need to file specific IRS forms to request tax discharge.
  5. Communicate with the IRS: Engage in negotiations with the IRS, presenting your case for tax discharge. The IRS will review your case and determine whether your tax debt is eligible for discharge.
  6. Implement the Discharge: If approved, you can finally enjoy the relief of having your tax debt discharged.

Conclusion

Tax discharge is a valuable tool for those burdened by tax debt, offering the possibility of a fresh start. However, navigating this complex process requires expertise and guidance, which Priority Tax Relief is well-equipped to provide. Remember, not all tax debts can be discharged, so it’s crucial to seek professional assistance to determine your eligibility and explore other available tax relief options. With the right partner by your side, you can take the first step toward financial freedom and a brighter future.

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FAQs

 The simple answer is no. A business and a person are completely separate, thus, any personal tax debts or liabilities should not affect your business.

Tax debt can be an exhausting and complicated thing to deal with on your own. Communicating with the IRS and professionally handling your tax liabilities are just two of the services companies like Priority Tax Relief can offer.

No. The IRS’s Innocent Spouse Relief protects you from paying these additional taxes. However, this does not relieve you from household employment taxes, business taxes, individual joint responsibility payments etc. Priority Tax Relief helps you learn more about innocent spouse relief.

The most popular option to date would be an Offer In Compromise (OIC). At Priority Tax Relief, we help tax relief help become more accessible to taxpayers in need and help them understand how they can qualify for these options.

IRS tax liens are legal claims on your property when you do not settle your tax debts. The IRS usually sends out a notice when no payment has been made after a liability assessment. Find out more about tax liens with Priority Tax Relief.

Yes. Not only can the IRS put a claim on all your current property, tax liens can also affect any property or intangible or tangible assets that you obtain in the future. At Priority Tax Relief, we help you understand federal tax liens and how to communicate with the IRS.

 

Tax levies are the actual seizure of your property and are different from legal claims or tax liens. Settle your taxes before the IRS sends out a notice. Priority Tax Relief helps you understand tax levies and how you can avoid them.

Yes. Not only can they seize physical property but they can also legally take hold of the money in your bank account and other wages. To avoid this from happening, contact Priority Tax Relief now.

Your debt will, unfortunately, continue to grow and you will possibly lose a great number of your assets. It is definitely a scenario we do not wish to see happen to anyone, that’s why Priority Tax Relief makes sure that our help becomes within reach.

Need expert help? Looking to get back on track?