Discharging Tax Debt

Bankruptcy Attorney

‘Can I discharge my tax debt’ is one of the most popular questions people ask regarding bankruptcy. In 2012 alone, 1.1 million Americans filed for bankruptcy, and many of these individuals found themselves in this situation because of an inability to pay off tax debts. But the real question is, ‘can bankruptcy actually help my tax debt situation?’

The General Rule

The bottom line answer is yes; yes it is possible to discharge some of your tax debt under a Cincinnati bankruptcy. The more realistic answer is no; no you probably won’t be able to discharge your tax debt under bankruptcy.

The discrepancy lies in the different conditions and rules of Chapter 7 and Chapter 13 bankruptcies. Under Chapter 7, it is likely that you will simply continue to owe your debt at the end of your bankruptcy case. Under Chapter 13, you will probably be forced to repay it through a repayment plan.

But, as mentioned above, it is possible to discharge some of your tax debt. In order to do so, you must be able to meet strict and detailed conditions.

The Conditions

First off, the only type of tax that even qualifies to be considered is income tax. Under no circumstances can you discharge taxes related to fraud penalties, payroll taxes, etc.

Secondly, in order for your tax debt to be dischargeable, you must not have any history of tax evasion, fraud, or the likes. People who have willfully attempted to evade paying taxes will not be considered.

The third condition applies to the age of the debt. Rules and regulations state that the debt must be at least three years old. The fourth rule also deals with time. In order to be able to discharge the debt, you must pass the ‘240 day rule.’ This requires that your income tax have been assessed by the IRS at least 240 days prior, or not assessed at all.

The fifth and final condition simply requires that you filed a tax return at least two years prior to filing.

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