According to a Department of Justice press release, Michael Fletcher, a Tulsa, Oklahoma resident, pleaded guilty to bankruptcy fraud last week. Public records indicate that Fletcher filed for bankruptcy in 2011. As a part of the bankruptcy process, Fletcher was required to disclose any legal or equitable interest that he held in real property. Fletcher certified that he owned no such interest.
Part of the debt that Fletcher included in his Bankruptcy filing was federal income tax debt. Shortly after Fletcher filed the statement regarding his ownership of real estate, the Department of Justice filed a complaint to the bankruptcy court that objected to the discharge of his federal income tax debt. The Department of Justice alleged that Fletcher lied when he said that he did not own any real estate. The Department of Justice alleged that Fletcher owned an interest in a Tulsa home.
At trial, Fletcher testified that his parents owned the Tulsa home and that other family members paid the down payment for its purchase. As a part of Fletcher’s guilty plea, he admitted that he lied in his statement about his property ownership, as well as during his testimony at the hearing on the matter.
Fletcher is scheduled to be sentenced in December and faces up to five years in prison for the single count of bankruptcy fraud. Fletcher may also be sentenced to serve a period of supervised release after any term of physical incarceration is completed. Lastly, Fletcher may be required to pay fines and penalties associated with his conviction.
At first, this story may appear to be unrelated to tax, but it highlights the importance of having adequate representation during a bankruptcy proceeding involving the attempted discharge of tax debt. A common misconception about bankruptcy is that tax debt cannot be discharged. Although that is not completely true, there are several rules that place certain priorities on the tax debt that an individual filing for bankruptcy is attempting to discharge, which may affect its treatment in the bankruptcy process.
Both the bankruptcy and tax codes are complex and a taxpayer attempting to discharge tax debt through the bankruptcy process should contact an experienced tax attorney prior to proceeding further. Although certain tax debt can be discharged in bankruptcy, a taxpayer should consider their other options before jumping head-first into the bankruptcy process. A tax attorney with experience assisting clients in bankruptcy provides a unique perspective into the bankruptcy process, coupled with a detailed understanding of the tax code.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have an extensive track record of assisting taxpayers who have found themselves with tax debt and were considering a tax-motivated bankruptcy. Our legal team will meet with you, gather information about your particular situation, and assist in the development of a plan to address your tax debt. Although tax-motivated bankruptcy is an effective option for some taxpayers, there are also other viable options that can be explored. Do not attempt to navigate a tax-motivated bankruptcy alone. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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