🤔 Can bankruptcy wipe out your tax debt?

They say money can’t buy happiness, but a permanent 20% QBI deduction for your small business is a pretty good down payment.

This week’s lineup:

Business & Gigs

⚔️ Your 4-Step Plan to Slay the April Tax Surprise

Every freelancer fights a monster. It’s big, scary, and it loves to show up every April, demanding a sacrifice from your bank account.

But what if you could slay it? Better yet, what if you could tame it — breaking it down into four smaller, far less intimidating pieces throughout the year?

That’s what quarterly estimated taxes do. They aren’t a punishment. They’re the four key battles you must win to conquer the year-end beast before it ever has a chance to roar.

Know Your Enemy: The Surprise Tax Bill

When you worked for someone else, your employer took a slice of every paycheck and sent it to the government, keeping the beast fed and happy. Now that you’re the boss, that safety net is gone. You’re on your own.

The government’s system is “pay as you go,” and if you don’t pay as you go, you create a monster. It feeds on your untaxed income all year, growing bigger and angrier until it shows up in April, breathing fire and demanding a massive lump sum.

Quarterly payments are your strategy — four scheduled attacks on the beast, preventing it from ever getting too powerful.

Your battle dates are always the same:

Mark them. Honor them. These are the days you fight back.

See which “tax weapon” fits your freelance style so you can stop the monster before it grows. Keep reading →

IRS Survival Guide

☢️ Can Bankruptcy Really Nuke Your Tax Debt?

Few things in life cause that cold, 3 a.m. stomach-clench quite like owing the IRS. It’s a special kind of dread, a feeling that you’ve run afoul of an entity that doesn’t sleep, doesn’t bargain, and definitely doesn’t have a sense of humor about Form 1040.

When that debt mountain looks unclimbable, the mind inevitably wanders to the “nuclear option”: Bankruptcy.

It’s the big red “reset” button for your financial life, right? You file some papers, the judge bangs a gavel, and all your creditors (including Uncle Sam) vanish in a puff of legal smoke.

Well, not exactly.

When it comes to the IRS, bankruptcy is less of a magic wand and more of a very complicated, very specific legal tool. Wiping out tax debt is possible, but the IRS has built a fortress of rules around the process that you must navigate perfectly.

The Vocabulary Lesson (Quick, We Promise)

First, there are two main “flavors” of personal bankruptcy.

The magic word we’re chasing here is “discharge.” A discharged debt is one you are no longer legally obligated to pay. And getting the IRS to agree to this is, as you might imagine, tricky.

The Great Tax Debt Gauntlet: The Rules for Discharge

You can get old income taxes completely wiped out in a Chapter 7 bankruptcy. But to do it, your tax debt has to successfully run a ridiculous obstacle course.

If it fails even one of these tests, it’s not getting discharged.

1. The 3-Year Rule (The Due Date) 

The tax debt must be for a tax return that was due at least three years before you file for bankruptcy. This includes any extensions you filed. For example, if you want to file for bankruptcy on May 1, 2026, you could potentially discharge taxes from your 2022 return (which was due April 15, 2023).

2. The 2-Year Rule (The Filing Date) 

This one trips everyone up. You must have actually filed the tax return in question at least two years before filing for bankruptcy. This is the anti-procrastination rule. You can’t show up to bankruptcy court with a shoebox full of unfiled returns from the last decade and expect relief. If you filed that 2022 return late (say, in June 2024) you have to wait two full years from that filing date.

3. The 240-Day Rule (The Assessment Date) 

The IRS must have “assessed” the tax at least 240 days before your bankruptcy filing. An assessment is just the formal recording of your tax debt. For most people who file on time, this happens right away. But, if you were audited, the assessment date is the date the IRS finalized the audit and officially added the extra tax to your bill.

4. The “Don’t Be a Shyster” Rule (No Fraud) 

This seems obvious. You cannot discharge a tax debt if you filed a fraudulent return or were actively trying to evade paying your taxes. If the IRS has already slapped you with a “civil fraud” penalty, you can pretty much forget about discharging that debt.

Want to know which specific tax debts are immune to bankruptcy and how Chapter 13 could still be your secret weapon for a financial reset? Keep reading →

Filing 101

📜 The Cohan Rule: When You Don’t Have Receipts

There is a specific kind of cold sweat that breaks out when you realize you have lost a receipt for a legitimate business expense. Maybe you left it in a taxi; maybe it went through the washing machine; maybe your dog, in a fit of pica, actually ate it. In the eyes of the IRS, if you can’t prove it with a piece of paper, it didn’t happen.

But before you resign yourself to overpaying your taxes, you should know the story of George M. Cohan. He was the Broadway legend who gave us “Give My Regards to Broadway” and “Yankee Doodle Dandy.” But to tax nerds, he is a hero for a different reason: He was a man who hated paperwork, got sued by the IRS because of it, and won.

What is the Cohan Rule?

In the late 1920s, the IRS audited Cohan. They found that while he was undoubtedly spending a fortune traveling and entertaining actors and producers to generate business, he hadn’t kept a single receipt. True to form, the IRS disallowed every single dollar of his travel and entertainment deductions. They argued that without paper proof, the expense was zero.

Cohan sued, and the case went all the way to the U.S. Second Circuit Court of Appeals. In 1930, the court handed down a decision that would become legendary (Cohan v. Commissioner). The judge ruled that “absolute certainty in such matters is usually impossible and is not necessary.”

Essentially, the court told the IRS that if it is obvious a taxpayer spent money to run their business, it is unfair to allow zero deduction just because the exact paperwork is missing. The court ordered the IRS to make “as close an approximation as it can.” This principle — that you can estimate expenses if you can prove the activity occurred — became known as the Cohan Rule.

The Big “But”: Where the Rule Fails (The Section 274 Problem)

Before you start shredding your receipts and estimating your way to a refund, there is a massive catch. The Cohan Rule was so generous that Congress eventually stepped in to stop the party. They passed Internal Revenue Code Section 274(d), which specifically kills the Cohan Rule for the most fun categories of spending.

Today, you cannot use the Cohan Rule to estimate:

For these specific categories, the rule remains strict: No receipt, no deduction. The Cohan Rule cannot save you here.

Learn the specific “bargaining chip” expenses you can still reconstruct today —even if your dog actually did eat the receipt. Keep reading →

Will Your Retirement Income Last?

A successful retirement can depend on having a clear plan. Fisher Investments’ The Definitive Guide to Retirement Income can help you calculate your future costs and structure your portfolio to meet your needs. Get the insights you need to help build a durable income strategy for the long term.

Download Your Free Guide

Wild Tax Tales

💅 The Mean Girls Guide to IRS Liens

We’ve all had those weeks where we “forgot” to check our bank balance, but Lindsay Lohan took it to a cinematic level. Around 2012, the IRS decided that being a “Mean Girl” didn’t exempt her from the tax code. They filed massive tax liens for her peak earning years, proving that the taxman doesn’t care about your IMDB credits.

The IRS slapped her with liens of $93,701.57 for 2009 and $140,203.30 for 2010. When she didn’t pay, the IRS issued a levy in December 2012. A levy is a polite way of saying the government reached into her bank accounts and took everything it could find. Her co-star, Charlie Sheen, reportedly wrote her a $100,000 personal check to help satisfy the debt.

We found this story particularly wild because it highlights the IRS’s “beautiful indifference.” They don’t bargain for autographs; they just want the quarter of a million dollars they are owed. Whether you’re an A-lister or a tax-newsletter writer, if you ignore the bill, it grows meaner, adds 7 percent interest, and eventually brings the “tiger blood” drama to your doorstep.

Lohan’s saga is a reminder that fame is no shield against the taxman. When the money is rolling in, it’s easy to forget that a massive slice already belongs to Uncle Sam. Ignoring the reality doesn’t make it vanish — it just makes the eventual headline much more expensive.

The quick (and slightly prickly) stories we didn’t have time to get to:

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.