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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4300
Experience:  Experienced consumer bankruptcy attorney.
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Can back taxes be discharged in bankruptcy?

Customer Question

Can back taxes be discharged in bankruptcy?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  A.J. replied 3 years ago.

SavyLawyer :

Hello, and thank you for contacting Just Answer. My name is Adam, I am a bankruptcy law professional, and I look forward to answering your question today.

SavyLawyer :

That depends on how old, exactly, the tax debt is. Most recent tax debt cannot be discharged in a chapter 7 bankruptcy, but if it meets 5 relatively narrow criteria, the debt may be dischargeable either in a chapter 7 discharge or a chapter 13 repayment plan.

SavyLawyer :

(1) The due date for filing the tax return that the taxes should have been filed in is at least 3 years prior to the date that the bankruptcy petition is filed.

SavyLawyer :

(2) The return involved was filed at least 2 years prior to the date of the bankruptcy petition.

SavyLawyer :

(3) The assessment for the tax, from either the IRS or the relevant state revenue agency is at least 240 days old.

SavyLawyer :

(4) The tax return was not filed fraudulently (meaning there were no intentional misrepresentations on the return).

SavyLawyer :

(5) The person who owes the tax is not in some way guilty of tax evasion.

SavyLawyer :

If each of those requirements is met, then the back tax is likely dischargeable. It is important to note that one of the key factors here is that no tax for a return that was never filed is dischargeable. So, if a return was not filed, and a tax was still assessed, these are never dischargeable.

SavyLawyer :

So, in short, there are very limited circumstances in which back taxes may be dischargeable, and the taxes must meet the 5 criteria above. If the goal of a bankruptcy is to discharge old tax debt, it would be advisable to seek the assistance of an attorney in filing the bankruptcy petition, as taxes can be a complicated issue to resolve, and the taxing agency is often more likely than other types of creditors to challenge the dischargeability of a debt, making the assistance of an experienced bankruptcy attorney invaluable.

SavyLawyer :

I hope this helps, and I appreciate the opportunity to answer your question. If you require any further explanation or need clarification of anything I have said, please do not hesitate to reply. Otherwise, if you do not have any further questions, please remember to RATE my answer so that I can receive credit for my work.