Tax Insolvency

What Is IRS Insolvency?

An IRS insolvency or tax insolvency is when a taxpayer’s total tax balance exceeds his or her total assets.1 In most cases, a taxpayer is not required to include forgiven balances in income to the point that they become insolvent. The forgiven balance may also be eligible for the exclusion if it was discharged in a Title 11 bankruptcy proceeding or if the balance is qualified farm indebtedness or qualified real property business indebtedness.

How Do I Prove Tax Insolvency?

To prove tax insolvency to the IRS, you must calculate all your debts from any source, and then add up the value of all your assets. If you subtract your debts from the total value of your assets and the difference is negative, you are insolvent and you should give us a call to help!

Hire The Tax Lawyers Who Have Your Back

Whether you need assistance in claiming tax insolvency or innocent spouse relief, get a tax lawyer to help you resolve your tax problems. It does not matter if it is federal or state tax, our tax lawyers in Los Angeles and Orange County have decades of combined experience to help you become free of any tax liabilities. So, why wait? Contact our tax professionals at at 1-800-290-8160 today!


  1. Internal Revenue Service – What if I am insolvent?