Taxes that have not been paid on the due date or were underreported either by accident or by intention on a past tax return. The tax authorities (IRS) can demand payment of back taxes plus the imposing of penalties and or interest.
This is a legal process under Federal statutes that provides for rehabilitation of a debtor (provide the opportunity to make a fresh start) through the discharge of certain debts or through a debt repayment plan over a certain period of time. Creditors cannot contact the debtor during the bankruptcy. They must wait until it is fully discharged. There are three chapters of bankruptcy.
See descriptions below:
Chapter 7: In Title 11, United States Code, this chapter of bankruptcy law provides for a full liquidation of an entitys non-exempt property to satisfy creditors, and discharges all dischargeable debts.
Chapter 11: This chapter of the bankruptcy law provides for a partial payment of some debts and the partial discharge of some debts belonging to a business.
Chapter 13: This chapter of the bankruptcy law provides for the partial payment of some debts and the partial discharge of some debts for an individual. It is also known as the Wage Earners Repayment Plan since all creditors must receive a dividend.
The cost of an asset owned by a taxpayer. The cost of the asset may be adjusted upwards by the cost of improvements, or may be adjusted downward by depreciating the asset.
Burden of Proof
A formal legal requirement to provide persuasive information or evidence of the legitimacy of a claim. For tax returns, OICs, or requests for any resolution, the burden of proof to substantiate the claim or deduction rests with the individual or entity either required to sign the return or who submitted the claim.