Q: WE GOT AUDITED ON INCOME TAXES ON 2007/2008. WE CANNOT PAY IRS BACK. WHAT SHOULD WE DO? BANCRUPTCY? OIC? PLEASE HELP.
A: Before considering the BK, I would consult a tax attorney to find out if you qualify for an offer-in-compromise (OIC). Due to negative consequences of a BK, this would be a better alternative. And, if you are in BK situation you are ineligible fro OIC. Good luck.
You can file a Bankruptcy to discharge taxes after the taxes have been assessed for 8 months. Make sure to file the amended taxes for the State too. The same 8 months rule applies.
I say this in your specific situation because it appears the taxes were filed for more than 3 years. I have not listed all of the requirements here as I am just answering your immediate question.
An Offer in Compromise might also work if your assets are minimal and your income is low enough to qualify. Remember you have to give a non refundable deposit with an OIC. Only the Government can come up with a term non refundable deposit.
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