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Settling State Tax Liability In Cases Of Insolvency

In Texas, if you are unable to meet your state tax liability you can seek what is known as an insolvency settlement from the Texas Comptroller. Also known as an insolvency plan, this procedure does not necessarily require a bankruptcy filing under federal law.

There are, however, numerous procedural requirements for eligibility for an insolvency settlement. At Brown, PC, we can explain what your options are and use our in-depth experience to help you take full advantage of them — including a possible insolvency settlement.

Lawrence Brown began his career with the Tax Division of the U.S. Department of Justice before founding our firm more than 25 years ago. Based in Forth Worth, we have a proven record of success assisting clients throughout Texas, as well as clients in other jurisdictions who need to resolve Texas state tax issues.

Are You Eligible For An Insolvency Settlement?

The process for seeking an insolvency plan arises out of the contested case process. This means that you must comply the requirements for disputing the amount of tax the state says you must pay and seeking a redetermination order.

If paying the proposed tax would make you insolvent, or the value of your property is less than the total amount due, you may be eligible for an insolvency settlement.

A formal bankruptcy filing in federal court is not required to pursue this remedy. But you have to make your request for an insolvency settlement in a timely manner. This means an insolvency settlement after a hearing number is assigned an administrative law judge but before a notice about that hearing is issued.

What Documentation Do You Need To Provide?

Your issues may concern sales tax, sales and use tax, or any other Texas state tax. Regardless of the type of tax bill at issue, a request for an insolvency settlement has to be supported by substantial documentation. This includes copies of:

  • Federal income tax returns going back three years
  • Financial statements going back three years
  • Bank statements for the previous six months

You will also have to provide an inventory of all the property you own, along with liabilities. If you have filed bankruptcy, liquidated assets or stopped doing business, it will be necessary to show the appropriate paperwork. We can guide you through this process.

Seek Assistance From A Texas State And Local Tax Attorney

At Brown, PC, our team represents clients in Texas, California and throughout the United States in state tax matters as well as all matters of tax controversy and litigation. To discuss your state tax compliance issue with an experienced and knowledgeable tax lawyer, contact the firm online or by calling toll free 888-870-0025.

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