Discharging Civil Tax Penalities In Bankruptcy

Posted by on Feb 13, 2012 in Tax Issues in Bankruptcy | 1 comment

Oftetimes, persons facing tax issus are dealing with penalties that may or may not be dischargeable in bankruptcy.   The key in such cases is determine if 1) the underlying tax is dischargeable, or 2) if the event that caused the penalty to take place occured more than 3 years prior to the bankruptcy .   The persons facing these type of tax problems only have to meet 1 of the above criteria to be considered for a BK discharge.

Such penalties must be distinguished from other types of penalties such as those that arise from failure to pay a personal assessment ie. trust fund recovery penalties or the like.   Thus, penalties for late fees, or failure to file tax returns might be dischargeable but ultimately, this requires the thorough analysis of a bankruptcy attorney.

Unsecured tax penalties are not priority claims – that means these types of claims are dischargeable.  Under 523(a)(7), the bankrupcty code says that such tax penalties are dischargeable under the situations mentioned above.

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