Taxes and Bankruptcy

Taxes are generally not dischargeable, however, there is an exception. You can discharge taxes if the following rules are met:

a) The due date for filing a tax return is at least three years ago.
b) The tax return was filed at least two years ago.
c) The tax assessment is at least 240 days old.
d) The tax return was not fraudulent.
e) The taxpayer is not guilty of tax evasion.

Return Due At Least Three Years Ago

The tax debt must be related to a tax return that was due at least three years before the taxpayer files for bankruptcy.  Therefore, a tax debt might be dischargeable if you are filing bankruptcy in 2014 for tax debt from 2010.

Return Filed At Least Two Years Ago

The tax return for which the taxpayer owes must be filed at least two years before the bankruptcy is filed.

Assessment At Least 240 Days Old

The IRS must assess the tax at least 240 days before the taxpayer files for bankruptcy.

Return was Not Fraudulent

There must not be any fraud involved with the filing of the return in question.  You did not attempt to mislead the IRS when you filed your tax return.

Taxpayer Not Guilty of Tax Evasion

The taxpayer cannot be guilty of any intentional act of evading the tax laws.  You did not attempt to evade any tax laws.

Remember, the taxpayer must actually file the tax return for the year of the debt in question.  Therefore, it is always best to review your tax records before filing bankruptcy.

For more information on which debts are dischargeable during bankruptcy, it is highly recommended that you speak to an experienced bankruptcy attorney.  Most attorneys will offer free consultations and can give you information as to which of your debts are dischargeable at the beginning of the process.