Yes, you can discharge your tax debt in Bankruptcy. There are, however, limitations to what tax debt can be discharged in your Bankruptcy.

In order to discharge your tax debt the debt must

(1) be over three years old;

(2) you must have filed those returns at least two years ago;

(3) you cannot have committed fraud, including, but not limited to, tax fraud or tax evasion;

(4) the tax debt must have been incurred over 240 days prior to you filing Bankruptcy;

(5) the tax debt must be from income tax debt (not other types of debt such as sales tax or payroll taxes); and

(6) you must have filed the tax returns yourself.

For example, if it is 2014 and you owe taxes from 2010, your taxes were filed on time by you and are the result of income tax liabilities then that tax debt should be dischargeable. If, however, it is 2014 and your tax debt is from 2010, but you did not file your returns on time, then that tax debt will likely not be discharged.

Furthermore, if the IRS or FTB filed the returns for you, those taxes will never be dischargeable.

I often recommend obtaining an Account Tax Transcript from the taxing agency so that you can see in more detail information about the tax year in question. The IRS allows you to obtain your Account Transcript online. The Account Transcript allows you to see who filed the return, when it was filed, how much is owed for that year among other things. You can obtain your IRS Account Transcript here.

If you filed your returns yourself, but filed them late, keep in mind that those tax liabilities are not dischargeable until two (2) years after they have been filed, and only if they are for tax years that are greater than three (3) years. So the general rule of thumb is that tax debt can be discharged in Bankruptcy if it is over three years old and the returns were filed over two years ago.

However, there are some limitations to the type and timing of whether or not that tax debt will be dischargeable. If your tax debt is not dischargeable, it is considered a priority debt. Priority debts will survive a Chapter 7 Bankruptcy, and not be discharged.

Even if your debt cannot be discharged, Bankruptcy could still provide a great tool for managing your tax liabilities without continuing to accrue penalties and interest. For example, if you do have priority tax debt that cannot be discharged, a Chapter 13 Bankruptcy may be a good option. You can read more about how taxes can be handled in Chapter 13s here. You should contact an attorney to discuss your particular situation and discuss what type of Bankruptcy will be best in your specific case. I provide free consultations, and would be happy to discuss your case. I can review through with you whether your tax liability is likely to be discharged, and if not, how Bankruptcy can still help you in your situation.

Contact me today to discuss your case!
 

 

 

 

This website does not, and is not intended to, provide a comprehensive guide to your Bankruptcy or Bankruptcy in general. Further, nothing contained in this website shall be construed to provide any guarantees, warranties or predictions regarding the outcome of your legal matter. You should consult with an attorney to determine the effects of Bankruptcy in your case. Results are not always typical because each case is different. We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy code.

To ensure compliance with requirements imposed by the IRS in Circular 230, we inform you that, unless expressly stated otherwise in this communication (including attachments), any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of:

(i) avoiding penalties under the Internal Revenue Code or
(ii) promoting, marketing or recommending to another party any transaction or other matter addressed herein.

 

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