Ordinarily, tax debts are not discharged or cancelled after filing bankruptcy. There is a possible exception in regards to certain federal tax debts.
Generally speaking, it is important to have all the facts about the specific debt before determining if Federal Income Tax is dischargeable. It’s also important to determine time periods which make tax debt dischargeable by filing bankruptcy.
Copies of account transcripts may be obtained from your local IRS office. You can also call the IRS Hotline at 1-866-860-4259. Specifically, request the MFTRA-X Transcript. With this information in hand, you can best determine if a Federal Income Tax is dischargeable by filing bankruptcy.
Conditions When Filing Bankruptcy Discharges Tax Debt
A person’s federal income tax debt is dischargeable when filing bankruptcy, specifically Chapter 7 bankruptcy, if the person filed a tax return and all of the following is true:
- The return was not fraudulent and was filed on time or the return was late but filed more than two (2) years before the bankruptcy petition was filed.
- The tax is not a priority claim.
- The debtor did not willfully evade taxes.
Priority claims occur when the tax return was due less than three (3) years before the date of the petition. Keep in mind any extension obtained changes the due date. In addition, a tax debt, if assessed within 240 days before the date of filing the position, is considered a priority debt.
This is just a brief look at the possibility of discharging tax debts. For a complete analysis of whether your tax debt is dischargeable through filing bankruptcy, you should contact the RGG Law office for a free consultation.