As “The Bankruptcy Handbook” reminds taxpayers, getting on the wrong side of Uncle Sam by ignoring his notices is dangerous. Not only will that make government debt collectors angry, the amount of the outstanding tax debt will increase due to interest and penalties. On the other hand, as I explained in my earlier bankruptcy blog, Oh, Yes You Can Get Rid Of Back Taxes, the myth that you can never have tax bills discharged in bankruptcy is just that – a myth. In fact, most income taxes more than three years old qualify for forgiveness under Indiana bankruptcy laws. Too bad the two distraught taxpayers I read about didn’t know that…
Just a couple of weeks ago in Birmingham, Alabama, a 48-year old taxpayer telephoned the IRS and made threats. The IRS called the sheriff, who proceeded to the man’s home, only to find him gone. When the sheriff reached the man on his cell phone, he said he was on his way to drive his car off a cliff. Instead, he drove to the IRS office and rammed his car into the building. The taxpayer ended up in the hospital, with little to show for his efforts except for two broken windows in the building on which he’d taken out his frustrations. Needless to say, the irate citizen still owes taxes, but now legal fees are added to his problems.
The second taxpayer, this one an Iowa resident, claimed the IRS owed him a refund of all the income taxes he’d ever paid. The Internal Revenue Service of the United States of America, he said, has no jurisdiction over him – he’s a “citizen of heaven”! (In almost twenty five years of practicing bankruptcy law in Indiana, I sometimes think I’ve heard it all, but I confess I hadn’t heard this one!). Now taxpayer #2 owes an additional; $250,000 fine. (Needless to say, he’s not getting the refund, from Heaven or from the IRS!)
These true stories are funny yet sad. Most important, they bring out how important it is for people behind on their taxes to work with an experienced consumer debt and bankruptcy professional, in order to make use of all the legal advantages available. There are three or four qualifications a taxpayer needs to meet in order to be excused from taxes under bankruptcy laws, and if those can be met, taxes are forgiven. Staying calm and visiting with an advisor doesn’t make headlines, but it can sure save on hospital bills!