Raleigh Unpaid Taxes and Tax Liens Bankruptcy Attorney

If you face tax liabilities and can’t afford to pay, you should contact Bradford Law Offices, PLLC immediately. Filing for bankruptcy might be the right solution for you. You can petition the court to discharge or reduce the amount of money you owe, protecting you from future collections actions.

State taxing authorities and the Internal Revenue Service (IRS) have the power to recover taxes owed to them. If you file for bankruptcy, you could protect yourself from the government taking action against you. You could benefit from resolving your tax debt without the pressure of anyone coming after you while you get your finances in order.

The Raleigh business bankruptcy attorney of Bradford Law Offices, PLLC understand how overwhelming it can be when tax liens and unpaid taxes get in the way of running your business. You worry about how it will affect operations and whether you could lose the company you worked hard to build. Our legal team can represent you in your case and determine the best method for resolving your tax debt.

Call us today at (919) 758-8879 for a free and confidential consultation with an experienced Raleigh unpaid taxes and tax liens bankruptcy attorney.

Understanding Bankruptcy Tax Litigation

As a taxpayer, you could resolve outstanding tax liabilities for your business by filing for bankruptcy. With Chapter 7 bankruptcy, you might be able to discharge certain tax debts, meaning you will never have to pay back the money you owe. However, you can’t discharge all debts. Sometimes, the bankruptcy court will order a debtor to sell certain assets to cover their tax liabilities.

Typically, filing for Chapter 7 bankruptcy requires selling assets with significant equity to pay back creditors, such as the IRS and state taxing authorities. However, liquidating assets through Chapter 7 often isn’t possible because the amount of equity isn’t substantial. You must pass a means test to file for Chapter 7 bankruptcy.

Filing for bankruptcy is also beneficial because if you haven’t yet paid your taxes at the time of filing, you can avoid paying taxes upfront while litigating any tax disputes you have. You can contest a tax liability you believe you don’t owe.

However, tax laws will require you to pay the assessment. If you have paid the assessment prior to filing for bankruptcy and you contest the tax assessment, the IRS or state taxing authority will refund the money if you win the dispute.

Resolving a tax dispute could take months or even years. Until then, you might be deprived of your money. If you file before you pay, the bankruptcy court could determine whether the assessed tax liability you contested is the correct amount owed without requiring upfront payment.

Disputing Unpaid Taxes and Tax Liens

The bankruptcy courts have jurisdiction to determine whether a person owes taxes. They can decide the amount or legality of federal and state taxes or penalties and fines resulting from the unpaid tax. They can make their decisions regardless of whether the tax liability has already been paid or assessed or if you contested the unpaid taxes previously.

When you file for Chapter 7, 11, or 13 bankruptcy, you can dispute various federal tax issues you face, including:

  • A tax lien’s validity
  • The amount or validity of a deficiency claim
  • Whether you’re eligible to have tax debt discharged

The IRS or a state taxing authority must issue you a refund if the bankruptcy court rules in your favor. The court could also protect you from prepaying those tax liabilities until resolving the issue.

Bankruptcy Courts in the United States

Your bankruptcy filing is governed by the federal bankruptcy court of the United States. There are district court divisions in your state where you file for bankruptcy.

A bankruptcy judge presides over the case in bankruptcy court. Under federal law, the district courts have exclusive and original jurisdiction over cases filed under the U.S. Bankruptcy Code. District courts grant bankruptcy courts the authority to handle bankruptcy petitions and other bankruptcy-related matters.

Litigating a bankruptcy case is similar to pursuing a regular case in federal district court. Each side involved in the case has a chance to present evidence, cross-examine witnesses, and request documentation from the opposing party.

However, the bankruptcy judge presides over the matter and draws conclusions. Even if the bankruptcy court holds a trial for the bankruptcy petition, it’s rare for a jury to resolve the issue.

Restrictions on Tax Debt Allowed in Bankruptcy Court

If the debtor or bankruptcy trustee contests or objects to a tax claim, the bankruptcy court can determine the validity of the claim or the amount of money owed.

Additionally, whether certain income tax debts can be discharged depends on whether the debtor met specific requirements before petitioning the court, such as:

  • Filing a tax return at least two years before petitioning for bankruptcy
  • The IRS hasn’t accused the debtor of fraud
  • The tax was due at least three years before filing for bankruptcy
  • The taxing authority assessed the tax at least 240 days before the bankruptcy filing occurred

As a business debtor, you must keep track of your income tax returns and tax assessments. The dates you filed will influence whether the bankruptcy court has the authority to discharge those tax debts.

Impact of Bankruptcy on Tax Returns

Filing for bankruptcy can affect your tax returns in numerous ways, depending on which chapter you choose to file under to resolve your unpaid taxes and tax liens.

Chapter 13 Bankruptcy

As a sole proprietor, you could petition the court for Chapter 13 bankruptcy. You must continue to file tax returns for your business during your ongoing bankruptcy case. Additionally, your tax returns for the four years prior to the date you file for bankruptcy must be filed no later than the day before you file your petition.

Until you resolve your case in court, you must file or request an extension for every required return for your business. You should also pay any current taxes owed as they come due. The court might dismiss your case if you don’t pay your business taxes or file your returns while your case is still in process.

Chapter 11 Bankruptcy

Incorporated businesses typically file for Chapter 11 bankruptcy. It’s a way to reorganize debts and create a plan to repay money owed for unpaid taxes.

During the ongoing case, you can review the tax debts you have and confirm the exact amounts you need to pay to the IRS or state taxing authority. Additionally, this type of bankruptcy doesn’t interfere with your business operations. You can continue as usual while the court reviews your petition.

The case might convert to a liquidating Chapter 7 if you don’t reorganize your tax debts and get the court to approve your repayment plan. Moving forward, it’s critical to ensure you have the finances to meet your financial obligations, such as payroll and federal income taxes. Incurring additional tax debt while trying to resolve your current debt could negatively affect your case.

Chapter 7 Bankruptcy

Filing for Chapter 7 bankruptcy makes sense for people planning to terminate their businesses. This type of bankruptcy offers relief to the debtor regardless of the amount of money they owe. The court appoints a trustee to manage and sell non-exempt assets to pay off back taxes and tax liens.

You don’t have the option of reorganizing your debts or creating a repayment plan with Chapter 7 bankruptcy. Sole proprietors and small business owners struggling to pay off their tax debts typically benefit the most from this type of bankruptcy case. You can discharge qualifying debt incurred by your business, and possibly personal debt, under Chapter 7.

Partnerships can also file for Chapter 7 bankruptcy. However, you can’t discharge your tax debt. Instead, the trustee assigned to the case liquidates the business by shutting it down or selling all assets to satisfy unpaid taxes.

Determining Eligibility for Tax Forgiveness

The specific circumstances of your situation will determine whether you can clear your obligations to pay unpaid taxes. Filing for bankruptcy could result in the court forgiving, helping you manage, or discharging your tax debt. However, the IRS uses certain criteria to decide if a business owner is eligible for tax forgiveness, such as:

  • Tax age – The most recent date taxes should have been filed or were due
  • Filed returns – Dates of required tax filings
  • Assessment – The date of assessed taxes
  • Fraud – Whether fraudulent activity existed in evading paying taxes

Why Choose Bradford Law Offices, PLLC?

The unpaid taxes and tax liens bankruptcy attorney from Bradford Law Offices, PLLC has represented clients in Raleigh, NC, since 1996. Our legal team dedicates every available resource to assisting businesses with their cases to discharge or reorganize their debts.

We understand how stressful it can be when you don’t have the finances to pay back the money you owe. When you hire us, we can offer various solutions to get you out of the hole you’re in and get your business back on track.

We believe in fighting for the future of small businesses. Facing unpaid taxes and tax liens is challenging for anyone. We know how much work you put into becoming a successful business owner. Creating a repayment plan or terminating operations might be your only chance of getting out from under the debt you owe. You can count on our legal team to review your financial situation and determine a strategy that might help you reach your desired outcome.

Contact Us

If you’re struggling with unpaid taxes and tax liens, contact Bradford Law Offices, PLLC today. We’re available 24/7 to speak with you about your case and determine whether we can help. A trusted and knowledgeable Raleigh unpaid taxes and tax liens bankruptcy attorney is ready to file a petition on your behalf to get you on the road to solvency.

Call us at (919) 758-8879 right now for your confidential consultation.