St. Louis Bankruptcy Lawyers Blog
Discharging income tax debt in bankruptcy can be difficult. The rules surrounding when income taxes can be discharged are quite complicated. However, income tax debt is eligible for bankruptcy discharge if certain conditions apply:
The tax debt is at least three years old.
To eliminate income tax debt in bankruptcy, the taxes to be discharged must have been “due and owing” for at least three years prior to the date the bankruptcy case was filed. For example, if you file a bankruptcy case on May 2, 2011, any income tax owed for tax year 2007 may be eligible for discharge, assuming other conditions are met. This is because any tax owed for 2007 was due and owing on April 15, 2008, which is more than three years prior to May 2, 2011. Some issues can arise that further complicate this rule, such as offers in compromise, so make sure to seek the counsel of an attorney before filing bankruptcy to discharge tax debts.
You filed the tax return.
You must have actually filed a tax return for the debt you wish to discharge at least two years prior to filing for bankruptcy.
You pass the 240-day rule.
The income tax debt must have been last assessed by the IRS at least 240 days before the filing of the bankruptcy petition (or must not have been assessed yet). Assessment refers to the IRS’s acknowledgment that the tax is due. The easiest way to determine when the tax was last assessed is to order a copy of a transcript, though the IRS does notify individuals of assessment via letter.
You did not commit fraud or willful evasion.
If you filed a fraudulent tax return or are in any way attempting to defraud the IRS by not paying taxes, then the tax debt will not be dischargeable.
Tax issues within bankruptcy are quite complicated and should be handled by a competent bankruptcy attorney, If your tax debt is not eligible for discharge in a Chapter 7 bankruptcy, you should speak to a St. Louis bankruptcy lawyer about paying back the taxes in a Chapter 13 bankruptcy.