Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Dec 17, 2019

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If you are filing for a bankruptcy discharge of tax debt, you should first research how banktuptcy will affect you given your particular situation, and whether or not your tax debt will even be discharged. The negative effect bankruptcy has on your credit rating can prove costly in the long term, and it is not always possible to discharge tax debt because there are specific IRS criteria the tax debt must satisfy in order to be discharged. It is a good idea to consult a tax law attorney prior to making any decision about filing for bankruptcy to relieve tax debt.

Criteria for Discharging Tax Debt in Bankruptcy

Under current IRS and bankruptcy law, tax debt is treated the same for both a Chapter 7 and a Chapter 13 bankruptcy filing. In order to discharge tax debt, you must meet the following five requirements:

1. The due date for filing the back-owed taxes was at least 3 years ago;
2. The tax return for the back-owed taxes was filed at least 2 years ago;
3. The assessment for the back-owed taxes is at least 240 days old;
4. The tax return is not fraudulent;
5. You are not guilty of tax evasion.

If any of these provisions are not met, your obligation will not be discharged and you will hold liability for the debt.

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Tax Debt That Can’t Be Discharged

Tax debt that is not yet filed, debt that is less than three years old, and debt that was fraudulently listed cannot, under any circumstances, be discharged by a bankruptcy filing. The IRS may also refuse to discharge the debt if you have not filed the last four tax returns.  Be aware of how the relevant tax law will impact your specific tax debt prior to filing for bankruptcy.

Getting Legal Help

Overall, bankruptcy discharge is not the best way to free yourself from tax liability. To better understand your options and find the best solution for your tax debt, consult with a tax attorney. Tax law attorneys can offer advice and even directly negotiate a settlement with the IRS to reduce your overall tax liability to a manageable amount.