Tag: overdue tax debt

Bankruptcy Law, Debt Relief

What are the Rules for Eliminating Tax Debts in Bankruptcy?

Posted on by Admin

A bankruptcy case can eliminate most debts, and many times, these eliminated liabilities include tax debts. However, not all tax debts can be discharged in a bankruptcy case. Ultimately it depends on the age of the debt, how it was incurred, and the type of bankruptcy being filed.

Chapter 7 and Chapter 13 Bankruptcies

In a Chapter 7 case, the bankruptcy trustee takes the assets the filer has that are not protected by Florida bankruptcy exemptions, liquidates them, and uses the proceeds to pay off as much debt as possible. If the person’s assets are not enough to cover all their debts, which often is the case, the remainder of the balances owed are discharged.

A Chapter 13 bankruptcy case allows the filer to work with the bankruptcy trustee on a three to five-year long repayment plan to pay off his or her debts. The goal is to pay most in full, but any unpaid balances are discharged at the end. However, which debts get repaid first depends on their priority level.

Tax debts are normally considered “priority” debts in both Chapter 7 and Chapter 13 bankruptcy cases, which means they are paid first when assets are liquidated in a Chapter 7 case and are included and paid in full for the most part in a Chapter 13 bankruptcy repayment plan. Since tax debt is considered priority debt, it is not dischargeable in a Chapter 13 case.

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Tax Debt will Affect Passport Renewals and Applications for Thousands of Americans

Posted on by Admin

Americans who have overdue tax debts will soon find it difficult to receive a new or renewed passport, according to the Internal Revenue Service (IRS). It is estimated that approximately 362,000 Americans have overdue tax debts, and soon, Congress will be increasing efforts to enforce a law passed back in 2015.

The 2015 law requires that the IRS and State Department deny applications for new or renewed passports for taxpayers who have overdue tax debt in the amount of $51,000 or more.

Increased efforts to enforce this law began in February 2018, according to a recent Wall Street Journal report. Currently, the IRS is in the process of sending the names of these 362,000 individuals to the State Department.

According to the IRS Division Commissioner, Mary Beth Murphy, authorities are currently only denying passports rather than revoking them for people who hold excessive IRS debts. In fact, the State Department has stated that the agency has already denied passports for individuals who hold tax debts. For the time being, Americans with over $51,000 in tax debt will be able to continue traveling abroad if they hold current passports.

The IRS has accounted for inflation and other assessed penalties, taxes and interest when calculating the amounts owed.  These amounts do not include debts that were collected by the IRS, such as FBAR penalties due to the person’s failure to report foreign financial accounts or child support owed. If the taxpayer has entered into an agreement for installment payments, is in the middle of a bankruptcy proceeding, is a victim of identity theft or is in a federally declared disaster area is not subject to revocation of their passports.

The State Department is within its rights to issue a passport for emergencies or other humanitarian reasons should a U.S. citizen who is subject to this law need to return to the U.S. from overseas.  Individuals affected by the law will be notified in writing by the IRS.

Click here to read more on this story.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.