April 15th is rapidly approaching and we all know what that means – that’s right tax return deadlines. Maybe you have already filed your tax return with the IRS and your state (assuming you have a astate income tax). Maybe you are trying to decide whether or not to file because you know you will owe and you have no money to pay those taxes. Here’s a quick rundown of things to think about when making these decisions.
The saying, “there’s nothing more certain in life than death and taxes” is not entirely true. Most people think that even bankruptcy will not get rid of a tax bill. That’s incorrect. You can discharge certain kinds of taxes in bankruptcy provided you do it right.
Rule #1 – File your tax return even if you can’t pay. Yes, you will get that nasty-gram from the IRS for not paying, but you can actually benefit by filing even if you cannot pay. Some taxes are dischargeable in bankruptcy but only if you file your tax returns.
Rule #2 – The IRS determines your ability to pay much like the Bankruptcy Court determines your ability to pay your creditors. So if can pay something, you should. If you can’t, don’t worry about it right now. The IRS doesn’t want you living in a cardboard box either. A kinder, gentler IRS does exist if you play nice.
Rule #3 – Don;t try ot hide your tax refund. If you are getting a tax refund, but owe debt, don’t give it away to someone to hide. That’s fraud and it can land you in trouble. If it is measured in the hundreds of dollars, it is likely exempt and if it is measured in the thousands of dollars, there are places you can put it legally where it will be safe. This may be an opportunity to put the money to good use. Perhaps you can use it to negotiate a settlement of your debts or in the worst case, it may be just the ticket to pay your bankruptcy lawyer.
What to hear more? Check out my podcast episode where Jay Fleischman and I talk all about it.