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Posted on in Income Taxes

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If you are among the one in four Americans who received unemployment benefits during the pandemic, the IRS is not taxing the first $10,200 of it. 

Unemployment Benefits Are Generally Taxable

As the IRS states plainly, “[i]f you received unemployment compensation during the year, you must include it in gross income.” Unemployment Compensation, IRS Topic No. 418. Furthermore, “unemployment compensation” explicitly includes not just the usual “state unemployment insurance benefits.” It also includes “Federal Pandemic Unemployment Compensation provided under the . . . CARES Act of 2020.” Unemployment Compensation.

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Posted on in Tax Debts

Try to file bankruptcy before a tax lien gets recorded. But if you can’t, here are the effects of a tax lien under Chapter 7 and 13.

This blog post continues a series about the smart timing of your bankruptcy filing. (It was interrupted by two blog posts updating federal unemployment benefits.) The last in this series was about how good bankruptcy timing prevents you paying certain income tax interest and penalties. We ended with this: “The effect of a tax lien depends on whether the tax at issue qualifies for discharge, and whether you file a Chapter 7 or 13 case.” That’s today’s important topic.

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Chapter 13 gives you huge advantages for paying off your priority income tax debts. You’re protected while you pay what you can afford.


Last week we discussed the advantages of paying priority debts through a Chapter 13 “adjustment of debts” case. We referred to recent income taxes as one of the most important kinds of priority debt. Today we show how Chapter 13 can greatly help you take care of recent income tax debts.

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Posted on in Chapter 13

Chapter 13 gives you some huge advantages over Chapter 7 for paying your priority debts. You’re protected while you pay what you can afford.


Priority Debts under No-Asset and Asset Chapter 7

Our last two blog posts described how Chapter 7 can sometimes be a sensible way of dealing with priority debts. (Those are ones you can’t “discharge”—legally write off, the most common being recent income taxes and child/spousal support.) Our blog post two weeks ago: a no-asset Chapter 7 case discharges all or most of your other debts. So then afterwards you can better afford to pay your priority ones. Last week: in an asset Chapter 7 case your bankruptcy trustee collects your unprotected asset(s). He or she then pays part or all of your priority debt out of the proceeds from selling those asset(s).

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Posted on in Chapter 7

Your Chapter 7 trustee may pay your priority debts—in full or in part—through the proceeds of the sale of your unprotected, not exempt assets.


Our last blog post was about what happens to priority debts in a no-asset Chapter 7 case. Most consumer “straight bankruptcy” Chapter 7 cases are no-asset ones. This means that the bankruptcy trustee does not take anything from the debtor because everything is protected, “exempt.” The trustee does not take and liquidate any assets, and has nothing—no assets—to distribute to the debtor’s creditors. That’s a no-asset Chapter 7 case.

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