The Truth About Discharging Taxes: The Two-Year Rule

Author: Christopher G Carmona CPA, APC | | Categories: Accounting Services , Payroll Services , Tax Preparation Services

Blog by Christopher G Carmona CPA, APC

With the downturn in the economy and massive job losses, personal bankruptcy filings have exploded. Many clients may benefit from including federal tax debts in their petition during this time. Besides being aware of the tax resolution options of bankruptcy, a professional will be familiar with administrative tax resolution methods, which the client should pursue first. As experts in the field, we at Christopher G Carmona CPA, APC want to help you understand the truth about discharging taxes and how it can affect you. 

A late-filed tax return must have actually been filed more than two years before the bankruptcy petition date. In order for a document to be considered a ‘return,’ under either the bankruptcy or the tax laws, it must purport to be a return, be executed under penalty of perjury, contain sufficient data to allow calculation of tax, and represent an honest and reasonable attempt to satisfy the requirements of the tax laws. Therefore, although a substitute for return SFR (Substitute For Return) generally doesn’t count as a return, if the debtor signs the SFR (Substitute For Return), it may constitute a return. Therefore, it is almost always advisable for the client to file all delinquent returns and, if possible, let the mechanical time frames pass before the bankruptcy petition is filed.

If you’ve received an IRS letter, or other tax correspondence from the IRS, a state agency, or a local agency, it can be difficult to know what to do next. At Christopher G Carmona CPA, APC, we represent clients who owe IRS penalties, interest, and taxes. I offer my services across Diamond Bar, Los Angeles, Oceanside, Orange County, Riverside County, San Diego County, and the surrounding areas. 

Get in touch with us today!

For a complete list of our services, please click here. If you have any questions about filing taxes and accounting, I would love to hear from you. Please contact me here, or call us toll free at (800) 227-2891 or (323) 707-6148.  



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