A Bankruptcy Lawyer’s Blog

Credit – Liquidation Bankruptcy – Part 4

Taxes

Taxes are another debt that often can’t be discharged. The rules on discharging taxes in bankruptcy are too complicated to explain thoroughly here. But here is a simplified version.

Income taxes may be discharged under three conditions:

1. The taxes must be at least three years old, meaning they were due at least three years before you filed your petition. That date is usually April 15 of the year following the tax year.

2. The taxes must have actually been filed at least two years before you file the bankruptcy.

3. The third condition is that at least 240 days have passed since the taxes were assessed, meaning that the Internal Revenue Service decided exactly what you owe.

You might know the first two dates but you’re unlikely to know this one. If you owe taxes that you think might be discharged, it’s a good idea to get a copy of your transcript from the I.R.S. to be sure of all the dates. You can request a transcript from your local I.R.S. office.

Even if the tax debt meets all of the above conditions, it still won’t be discharged if the I.R.S. can show that the return was fraudulently filed or that you willfully tried to evade the tax or committed tax fraud, such as hiding income or using a phony Social Security number.

Fraud

Consumer debts won’t be discharged if they were obtained by fraud. In this situation, it would be up to the creditor to object to a certain debt being discharged and they’d have to complain before the discharge order is entered. That doesn’t happen very often.

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