In order to discharge personal income taxes, all of the following factors must be met:

  1. The most recent due date of the return is more than three years prior to the filing of the bankruptcy petition.
  2. The tax return was filed at least more than two years before the filing of the bankruptcy petition.
  3. The tax was assessed more the 240 days prior to the filing of the bankruptcy petition.
  4. The tax return was not fraudulent.
  5. The taxpayer is not guilty of a willful attempt to evade or defeat the tax.

Offers in compromise or filing for an extension could also affect your ability to discharge income taxes.

Payment Of Income Taxes Through A Chapter 13 Plan

Even if your taxes cannot be discharged in a Chapter 7 bankruptcy, do not lose hope. You may be granted relief in a Chapter 13 bankruptcy. If you do not meet the above criteria for discharging personal income tax, the taxes are considered to be “priority taxes.” This means they must be paid in full during the life of a Chapter 13 payment plan. These plans usually span three to five years.

The good news is that the penalties on your taxes may be treated as unsecured and nonpriority, meaning that a portion of your debt does not necessarily have to be paid in full. Most importantly, you will have peace of mind knowing that, at the end of your payment plan, you will no longer owe taxes to the IRS or to the state.

It is no easy task to determine how your taxes will be treated and to what extent tax liability is dischargeable. If you owe taxes, you should speak with an experienced bankruptcy attorney about your tax liability and what to expect when filing for bankruptcy.

Schedule Your Free Consultation

At the Law Offices of Ira C. Yellin, LLC, we are dedicated to obtaining the fullest debt relief for our clients. Conveniently located in Franklin, Massachusetts, our attorneys are readily available to assist you with your most urgent legal needs.

For more information or to schedule a free initial consultation, please contact us online or call 508-528-8885.

The Law Offices of Ira C. Yellin, LLC, is a debt relief agency as defined by the Bankruptcy Code, 11 USC § 101(12A).