Tax Debt and Your Bankruptcy

: Chris Lee Law Firm

  Filed under: Taxes

TaxesFaced with mounting tax debt, you may have considered filing for bankruptcy. Many kinds of tax debt are fully dischargeable through bankruptcy, but not all are. In addition, an individual must meet certain requirements in order to qualify for discharging tax debt through bankruptcy.

Five Rules to Discharge Tax Debt

Essentially, there are five requirements for your tax debt to be eligible to be discharged in bankruptcy. They are as follows:

  • The due date for filing the returns in question is three or more years ago.
  • The tax return itself was filed at least two years ago.
  • The assessment is over 240 days old.
  • The tax return was legitimate and there was no penalty for tax fraud.
  • You are not and never have been convicted of tax evasion in the past.

If the income taxes in question meet all five of these requirements, they are eligible to be discharged via a Chapter 7 or Chapter 13 filing. As you can see, it is no easy matter to simply file for bankruptcy and have your tax debts magically disappear. In addition, the petitioner must prove that their last four tax returns have been filed with the IRS, and the filing date must be no later than the date of the first creditors’ meeting in their bankruptcy case.

Consult a Dallas bankruptcy lawyer to help you determine whether your income tax bills are eligible for discharge, and whether filing for bankruptcy to reorganize or discharge your debts is the smart financial move for you. Every case is different, and everyone’s finances are unique.


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