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