Tax Attorney in Louisville, Kentucky

Tax debt does not fix itself. Interest keeps running. Penalties stack on top. The IRS can file a lien against your home or take money straight from your paycheck.

Nick Thompson is a tax attorney in Louisville, Kentucky. He holds U.S. Tax Court License #51. He has practiced law in Kentucky since 1991 and in West Virginia since 1988. Before entering private practice, he worked as an attorney for the West Virginia state tax department. That job showed him how a tax agency builds a file against a taxpayer.

Some tax debt can be wiped out in bankruptcy. Some cannot. The rules are strict, but they are written down and they are testable. A Louisville bankruptcy attorney who also handles tax law can tell you which group your debt falls into.

Call 502-625-0905 for a free consultation.

Which Income Taxes Can Be Erased in Bankruptcy

Federal income tax can be discharged. It has to clear four tests first. Lawyers call this the 3-2-240 rule.

1. 1The tax return was due at least three years ago, including extensions.
2. 2You actually filed that return at least two years ago.
3. 3The IRS assessed the tax at least 240 days ago.
4. 4You did not file a fraudulent return and did not try to evade the tax.

Miss one test and the debt survives. Meet all four and the balance can be gone for good. Timing matters more than almost anything else here. Filing a case one month too early can cost you thousands.

We pull your IRS account transcripts before we file. Those transcripts show the assessment dates. We read them and count the days. Learn more about discharging income tax debt and how the timing works.

Tax Debts That Survive Bankruptcy

Not every tax bill goes away. These usually stay:

• Payroll taxes you withheld from employees, often called trust fund taxes.
• Tax owed on a return you never filed.
• Tax from a return you filed late, within the last two years.
• Taxes tied to fraud or willful evasion.
• Recent income tax, under the three year cutoff.

There is still a plan for these. A Chapter 13 case can spread priority tax debt over three to five years. The IRS gets paid. You get one fixed payment and no more collection calls.

How Chapter 7 and Chapter 13 Handle Tax Debt

The two chapters treat tax very differently.

Chapter 13 also has one feature Chapter 7 lacks. It lets you deal with a recorded tax lien while you keep making payments. That matters when the IRS has already filed a lien against a home you plan to keep.

We look at both chapters in every tax case. The choice usually comes down to the age of the tax and whether a lien is already on file.

Mistakes That Cost People Their Discharge

A few avoidable errors turn a dischargeable tax debt into a permanent one.

• Filing bankruptcy a few weeks before the three year mark passes.
• Filing before the two year rule is met on a late return.
• Filing a request for an installment agreement or an offer, which can pause the 240 day clock.
• Skipping a tax year entirely, since an unfiled year can never be discharged.
• Assuming a substitute return prepared by the IRS counts as your filed return. In most courts, it does not.

None of these are obvious from the outside. All of them show up on a transcript. That is why the transcripts come first.

Stopping IRS Collection

The IRS has powers no other creditor has. It can levy a bank account. It can take part of a paycheck without suing you first. It can record a lien that follows your house.

Filing a bankruptcy case triggers the automatic stay. Collection stops the day the case is filed. Levies stop. Garnishments stop. The phone stops ringing.

Bankruptcy is not the only answer. We also ask the IRS directly for a levy release, a lien discharge, or a lien subordination when a client needs to sell or refinance a home.

Offers in Compromise and Payment Plans

Not everyone needs to file bankruptcy to solve a tax problem. Other tools exist:

• Offer in compromise, which settles the debt for less than the full balance.
• Installment agreement, which sets a monthly payment you can afford.
• Currently not collectible status, which pauses collection when you cannot pay anything.
• Penalty abatement for reasonable cause, and first time penalty relief.
• Innocent spouse relief, when the debt belongs to a spouse or former spouse.

An offer in compromise is not a coin flip. The IRS uses a formula built on your income, your assets, and your basic living expenses. We run that math first. If the numbers do not support an offer, we say so and look at other options. Read more about Kentucky tax resolution and relief.

IRS Audits, Appeals, and U.S. Tax Court

An audit letter is not a verdict. It is the start of a process with real deadlines.

We handle audit correspondence, in person exams, and appeals. If the IRS issues a statutory notice of deficiency, you have 90 days to file a petition in U.S. Tax Court. That deadline is firm. Nick holds U.S. Tax Court License #51 and can file that petition for you.

Kentucky Department of Revenue Problems

State tax debt follows its own rules. The Kentucky Department of Revenue can file a lien, levy a bank account, and garnish wages. State income tax can sometimes be discharged under the same timing tests that apply to federal tax.

We handle state income tax, sales tax, and withholding tax matters alongside the federal side. Most clients owe both. It makes little sense to solve one and ignore the other.

Property Tax and Your Home

Unpaid property tax in Kentucky is sold as a certificate of delinquency. The buyer can add interest and fees. Left alone, it can end in a Master Commissioner sale of the house.

A Chapter 13 case can stop that sale and pay the property tax over time through the plan. See our page on property tax foreclosure defense for how that works.

• How much you owe, and to which agency.
• How old each tax year is.
• Whether the 3-2-240 tests are met, or when they will be.
• What you can realistically pay each month.

You leave with a plan and a straight answer. Free bankruptcy consultations are available in person at the Stone Creek Parkway office or by phone.

Call 502-625-0905 to set one up.

Frequently Asked Questions