Posted 3 years ago
Topic: Consumer Bankruptcy
Tax debt is dischargeable in Chapter 7 or Chapter 13
bankruptcy if it meets certain criteria.
If a tax debt satisfies the following (5) five requirements it can be
discharged or wiped out in your bankruptcy.
The tax debt is income tax debt. You may only discharge income taxes in bankruptcy. Other taxes such as payroll taxes or fraud
penalties may not be eliminated in bankruptcy.
Any interest accrued on dischargeable tax debt may be wiped out, and
penalties are dischargeable even if the tax debt is not.
The tax debt is at least three years old. In order for the tax debt to be dischargeable it must have been
due at least (3) three years prior to filing bankruptcy. This date includes any
extensions. For example, if your 2014
tax debt which was due in April was not filed until October 2010, you are not
eligible to eliminate the tax debt until October 2017.
3. The tax return was filed at least two years
ago. The tax debt must have been the result of a
tax return that was filed at least (2) two years prior to filing bankruptcy. The date your
return was filed is the measuring date.
tax assessment is at least 240 days old.
The tax debt must have
been assessed at least 240 days prior to filing bankruptcy. However, if the
taxing authority was prohibited from making an assessment (e.g. bankruptcy or
offer in compromise), then the time limit may be extended.
No Fraud or Willful Evasion. The
tax return filed must not have been fraudulent or you must not have willfully
evaded paying your taxes. Fraud is using
someone else’s social security number on your tax return. Willful evasion is deliberately reporting
less income than what was earned or deducting fictitious expenses.
your tax debt satisfies the above requirements and you file Chapter 7
bankruptcy you are entitled to a complete discharge of the debt. Alternatively, if you file Chapter 13
bankruptcy and your tax debt qualifies you will be required to repay some or
all of the tax debt, depending upon your income and assets, through a three to
five year repayment plan.
Tax debt is dischargeable in Chapter 7 bankruptcy if it satisfies five specific requirements.