A New Jersey bankruptcy debtor may be able to eliminate their tax liability, depending on a number of factors. Also, some types of taxes, such as income taxes, may be eliminated. Other types of taxes, such as sales tax and employer withholding tax, may not be eliminated.
In determining whether certain income tax may be eliminated, the bankruptcy laws focus on each year’s income taxes and the classification of the taxes for each year. In general, one may possibly be able to eliminate certain income tax that meet the following criteria:
1. The bankruptcy case was filed 3 years after the date that the taxes were due and should have been filed;
2. The bankruptcy case was filed 2 years after the returns were actually filed;
3. No lien was filed against the debtor;
4. The bankruptcy case was filed later than 240 days after the taxes were assessed;
5. No fraud was involved.
Please note that even though the debtor meets all of the above referenced criteria, the debtor may not be able to eliminate such tax liability.
Typically, a New Jersey bankruptcy debtor will not know the specific dates on which the IRS has documented certain matters that are important in determining when and if certain taxes may be eliminated. Therefore, in cases that involve income tax arrears, the debtor should obtain a copy of their comprehensive tax transcripts that reflect the detailed records of the Internal Revenue Service entries. The tax transcripts will reveal the dates that are relevant to the 5 criteria explained above, and whether a New Jersey bankruptcy debtor will be able to eliminate the debt.
Robert Manchel, New Jersey Bankruptcy Attorney, will answer your bankruptcy protection tax questions at (866) 503-5655.