Tax Motivated Bankruptcy Filings

A “tax-motivated” bankruptcy filing is one where a principal claim in the case includes a substantial tax claim (for any type of tax – income, sales, payroll, employment, and excise taxes) along with related penalties and interest, and the debtor seeks to eliminate them or otherwise reduce them to the greatest extent possible.

Simply stated, that is our specialty! Our Tax Bankruptcy practice group was created to focus on tax motivated bankruptcy filings . . .

In bankruptcy, tax claims can fall into one or more categories which dictate the treatment of the claim in bankruptcy:

• Dischargeable
• Not dischargeable – Not dischargeable now, but dischargeable in the future
• Not dischargeable – Not dischargeable now, but may become dischargeable because of future action
• Never dischargeable

In addition, the tax claim can be unsecured, secured, or under-secured depending on whether the taxing agency filed and properly recorded a notice of tax lien and whether you own property with equity to which the tax lien may have attached.

The only way to make a proper determination regarding the type of bankruptcy case and the best time to file it is to conduct a thorough Tax Dischargeability Analysis (TDA). For every bankruptcy case we file, we provide our client with a Tax Dischargeability Analysis Report which details the history and dischargeability of each tax claim along with our recommendation regarding the timing and best type of bankruptcy case to file.

The TDA will provide you with a comprehensive analysis of each tax claim, revealing the dates of all tax events (or nonevents) which may have occurred with reference to, and which may impact the dischargeability of, that tax claim, including:

• The due date of any tax return considering any valid extension requests
• The actual filing date of the tax return
• Whether the taxpayer filed the tax return
• Whether the taxing agency filed the tax return
• The date of all tax assessments:
  • based upon the tax return
  • based upon any amended return
  • based upon any Substitute-for-return (SFR), or
  • based upon any audit/examination adjustments
• The date of all penalty assessments
• Whether the taxpayer signed any statute of limitation waivers
• The date any tax liens were filed along with a review of the validity and value of any tax liens
• The existence of all possible tolling events (examples include any prior bankruptcy filing, submission, rejection or acceptance of an offer-in-compromise, IRS Due Process Hearings requests and related Appeals, amended tax returns, etc.)

The TDA will “flush out” all the information necessary for a proper review of each tax claim, detailing all facts in support of the conclusions set forth in the TDA report. In addition, with an understanding of your financial affairs, we can provide you with a recommendation of the best type of bankruptcy case and the appropriate date to file it to ensure the maximum discharge of all tax claims.

In the event we recommend that you delay the bankruptcy filing to achieve a greater discharge of your tax claims, then we will provide pre-bankruptcy legal representation so you can live your life free from the daily stress of worrying about the taxing agencies and other creditors.