Have you ever heard the statement “tax debt is not dischargeable in bankruptcy”? Luckily that assumption is not entirely correct and relief may be available. Non-dischargeable taxes includes debts for unpaid property taxes and any debts associated with unpaid income taxes, due within the 3 years immediately prior to filing bankruptcy.
However, if your tax debt meets the following criteria, it may be discharged in your Chapter 7 Bankruptcy:
- The money owed is for personal income taxes.
- The taxes were due at least 3 years before filing bankruptcy.
- The taxes owed must have been assessed by the IRS at least 240 days before filing bankruptcy.
- The tax return must have been filed by you at least 2 years before filing bankruptcy.
- You did not commit fraud or willful evasion when filing your return.
Example: You owe tax debt for the taxable year 2012. This debt was due on April 15, 2013. Assuming all of the criteria are met above…three years from this date would be April 15, 2016. If you file a bankruptcy case before April 15, 2016 this debt will not be affected by your bankruptcy filing. If you wait until after April 15, 2016 to file bankruptcy the 2012 and older taxes will be discharged in a bankruptcy case.
