Can I Discharge My Income Taxes In Bankruptcy?

One of the most common assumptions people make when they are looking into bankruptcy is that income tax obligations—both federal and state—can not be discharged. This is not always the case. In fact, Wagner Law Office has helped its clients get rid of hundreds of thousands of dollars in back taxes in just the past two years alone.

In order to determine whether or not a tax is dischargeable, the following six conditions must exist:

  1. The due date for filing the return must be at least three years before you file. Since your 2012 tax return is due by April 15, 2013, your 2012 taxes would be dischargeable if you file bankruptcy after April 15, 2016.
  2. The tax return must have been filed at least two years before you fileThis means if you file your 2012 return on May 1, 2013, you would meet this part of the test after May 1, 2015. However, if the IRS files a “Substitute for Return” (which doesn’t count as you filing to start the two year period running), you may need to wait. Depending on the jurisdiction, once the IRS files a SFR, the taxes are never dischargeable in bankruptcy.
  3. The taxes need to have been assessed at least 240 days before you file. This is rarely an issue since taxes are normally assessed within 30-60 days of the filing of a return. However, if there is an audit, you file an amended return, or other various issues are in play, this may delay the assessment.
  4. The tax return must be non-fraudulent.
  5. The tax is assessable but not yet assessed.
  6. The taxpayer has not engaged in behavior that is deemed a willful attempt to evade the tax.

In analyzing the complex issue of whether or not a tax is dischargeable, it's important to know that exact dates matter. Whether you are filing bankruptcy in Colorado Springs or the Denver Metro area, there are many different factors that will affect the timing of each of the above conditions. The attorneys at Wagner Law Office, P.C. are experienced in knowing these factors and ensuring that the filing of your bankruptcy case is timed properly.

Don’t hesitate to contact us to find out your options as soon as possible.