There are many debts that you can discharge through bankruptcy. Is tax debt eligible for discharge through bankruptcy? In some circumstances, a taxpayer can go to bankruptcy court and have an old tax debt discharged. There are criteria that have to be met for that to happen.
The Debt Was From A Tax Year At Least Three Years Ago
A petitioner facing a judge in bankruptcy court today would only be eligible for relief from taxes filed before 2009. Any other tax debt would be ineligible for discharge in bankruptcy court. The 36 month period starts on the day that your tax debt was due. Any extension of your due date will extend the amount of time you have to wait before that debt becomes eligible for discharge.
The Tax Return Was Filed At Least Two Years Ago
Taxes that were filed after 2010 would not be eligible for discharge at the current time. Any recent tax debt would not be eligible for tax relief until 24 months after filing. The 24 month time period begins on the day that you actually file your tax return. Tax returns that were not filed will not qualify for discharge no matter how old that debt may be.
Your Tax Debt Must Be At Least 240 Days Old
The tax debt must be assessed at least 240 days before you can ask for the debt to be discharged. It does not matter in what manner the tax was assessed against you. However, it might be easier to get the debt discharged if the tax assessment was a result of self-reporting of taxable income.
The Return Was Filed In Good Faith
A judge is not going to discharge any tax debt based on a falsified tax return. Attempting to evade taxes is not an acceptable basis to have your debts discharged. The IRS will help to determine whether the returns were filed in good faith or not.
Your Creditors Will See Your Returns
It is important that the borrower files their taxes on time each year. The bankruptcy court is going to ask for your last four tax returns. Your creditors are going to have access to any tax information that you hand over to the court. Furthermore, you would have needed to have your tax return filed before you first met with any debt relief services. You may not be able to reach a tax debt settlement if you did not file your taxes before seeking relief.
It is possible that your tax debt could be discharged. However, you have to make sure that you were actually filing your tax returns in an honest manner. Tax debt may not be eligible for discharge if you are simply trying to evade payment of taxes. Do plenty of research before you seek any relief from past tax debt. The courts will not be likely to discharge your debt if you do not follow all of the rules. Ignorance of the law is never a defense.
- 5 Tips for Preparing to File Your 2011 Tax Return (2011tax.org)
- TurboTax Mobile Apps (2012taxes.org)