While most tax debts cannot be discharged in either a Chapter 7 or a Chapter 13 bankruptcy, it is possible to discharge some IRS tax debts. We offer our clients a Tax Dischargeability Analysis, in which we can look at the specifics of your case to determine whether or not your debts do qualify to be discharged.
Since the BAPCPA in 2005 some clients have difficulty qualifying for a chapter 7 and being able to avail themselves of completely eliminating their debt, but even in a Chapter13 debtors can eliminate a large portion of the qualified IRS debt because it will not be a considered a Priority Debt (Priority Debts must be paid back at 100%)
There are several rules with tax dischargeabaility:
(1) 3 year rule: the tax return must have been originally due at least 3 years before filing Extensions and Amendments change this time frame.
(2) 240 day rule: Also, tax debts cannot be discharged if they’ve been assessed within 240 days of filing for bankruptcy. The 240 day period is extended in several circumstances.
(3) 2 year rule: The tax returns must have also been filed on time or at least 2 years before the bankruptcy has been filed.
(4) No Fraud or evasion rule: There must also not have been any willful attempt to evade or defraud in payment of taxes.
* While the underlying federal tax debt may be discharged, any federal tax liens cannot be discharged.
