Consumer Bankruptcy Journal Fall 2015 - Page 30

DEMYSTIFYING THE DISCHARGE OF TAX DEBTS (OR, TAX DISCHARGE FOR DUMMIES) By Larry Heinkel TaxProblemLaw.com T here have been a number of wonderful webinars and seminars on the topic of discharging income taxes, complete with legal citations and references by some of the experts in the field. We have found, however, that sometimes attorneys would like to have a complex issue such as this broken down into a few, easy-to-digest pieces. In an effort to do so, we have asked tax and bankruptcy attorney Larry Heinkel, Esq., of Florida (the creator of www. TaxDischarageDeterminator.com), to give us, in laymen’s terms, just what the practitioner needs to know to help him or her avoid malpractice and even make money in the art of discharging taxes in bankruptcy. First, you must obtain copies of “account transcripts” (not “return transcripts”) from the Internal Revenue Service (“IRS”) for each year to be analyzed. To do this, you will need either a signed Power of Attorney (form 2848) or form 8821. There are several ways to 30 CONSUMER BANKRUPTCY JOURNAL obtain the ATs, but probably the fastest and easiest is by calling the Practitioner’s Priority Hotline (866860-4259) and faxing the 2848 or 8821 to IRS. Practice pointer #1: when asked, say “yes, I am actively helping my client resolve his tax problems” or they won’t help you. Practice pointer #2: if you are representing the person whose name appears second on the tax return (usually the wife), you may need the name and SSN of the person whose name appears first in order for IRS to find the information on your client. Practice Pointer #3: if they don’t show a liability for a year you think there should be, or if the H and W no longer have identical account situations, such as due to a divorce or one spouse but not the other having filed bankruptcy or being granted innocent spouse relief, ask if there is a “non-master file account Winter 2015 transcript” which will be what you need in those circumstances. Second, make sure you understand that only “unsecured” tax debts can be discharged. In order for a tax lien to be considered “secured”, there must be a federal tax lien properly filed and there must be equity to which the lien attaches. So, do not fret just because you see a tax lien for, say, $100k if the equity in the debtor’s property is only $15k. (Bifurcate the debt into $15k secured and $85k unsecured, and then allocate the unsecured portion among the three possible categories (priority, non-priority, no