Can I discharge a debt thatI owe to the IRS if I file bankruptcy?

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Can I discharge a debt thatI owe to the IRS if I file bankruptcy?

Asked on August 4, 2010 under Bankruptcy Law, North Carolina

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Possibly. This debt may be eligible for discharge under either Chapter 7 or Chapter 13.  A Chapter 7 provides for discharge of qualified debts; Chapter 13 provides a payment plan to repay some debts, with the remainder of debts discharged.  However, in order to be discharged in bankruptcy, the tax debt must be all 5 of the following:

  1. The due date for filing a tax return is at least 3 years ago;
  2. The tax return was filed at least 2 years ago;
  3. The tax assessment is at least 240 days old;
  4. The tax return was not fraudulent; and 
  5. The taxpayer is not guilty of tax evasion.

If your situation does not meet all of the above criteria there are other alternatives for trying to work things out with the IRS; an "Offer in Compromise", is just one.  This is where you offer to pay a lump sum in exchange for release of the remaining debt.  You can also try to work out an "Installment" arrangement.  At this point you should speak with a bankruptcy attorney or even the IRS itself.  They can actually be quite helpful.

 


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