Can I discharge income taxes by filing for bankruptcy? 3 Answers as of August 15, 2010

I am filing for chapter 7 bankruptcy. Will my personal income taxes be discharged?

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Law Office of Barbara Seeley Curtis
Law Office of Barbara Seeley Curtis | Barbara Curtis
Only if they are over 5 years old.
Answer Applies to: Florida
Replied: 8/15/2010
David Nelson
David Nelson | David Nelson
There are ton of rules but it is possible.

First the tax year has to be over.

Second, the income tax had to have its return due to be turned in more than 3 years prior to filing, and if you got extensions then it was not due to be turned into the IRS until August or October depending on how many extensions you got. For instance, if you owed Federal Income Taxes after 2006, your return would have been due in April of 2007, so April 08, April 09 and after April 2010 you are good to go. If you got an extension to August, then wait until 8/20/10 to file, if you got an extension to October, then wait until 11/1/10 to file your bankruptcy case. If you owed for 2007 which was due in April of 2008, and if you got no extensions, and if the 2007 amounts were really high balances owing, great year for earnings but a negligent year for paying, then you could wait until 4/20/11 to file your case and beat this rule for the 2007 tax year.

Third, if you filed late, the late returns had to be turned in more than 2 years prior to filing your bankruptcy. They had to be received by the IRS more than 2 years prior the date that you file your bankruptcy case. There a couple of ways to find out, request a tax transcript for the year in question and it will tell you when the IRS got the returns. Or, go by the trashbag full of letters that they sent you and one of them will probably reference the returns in question, then you know that you filed at least prior to the date of that letter, then use that letters date as the effective date and move on from there.

Fourth, if the IRS filed a return for you, its not counted as you having filed your return. So, file them yourself right now and wait out the 2 years. I had heard some talk of changing this rule but have not actually seen it happen, however, I have not personally had it come up in a case for a long time so it might be worth looking up if it applies to you.

Fifth, you had to receive a notice of a balance owing (called an Assessment by the Bankruptcy Code, but not by the IRS or by the State of Californias taxing authority, the Franchise Tax Board) more than 240 days prior to filing your case. If after receiving such notice you made offers to compromise then that time plus a couple of months gets added to the 240 days. However, if you have been on a payment plan for a year or more then you have beaten this rule in most cases. If you have never made an offer to compromise, then just pick through all the IRS letters and see whats the oldest one you can find that references you owing them money for the year in question, and you use that date.

Sixth, if we are talking about the State of Californias income taxes then add 60 days to the 240 day rule automatically. For the State of California, you get a notice of tax due and then 60 days later you get a final notice of tax due. The first one will even say on it that it does not become final for 60 days. That is the 60 days that you must add to the 240. If you find the "final" notice then you can go 240 days past that notice.

Seventh, If you are not sure if you made an offer to compromise, or if you did make one, then give it at least a year and ask an attorney for help to determine the earliest date you should file your bankruptcy.

Eighth, California State Sales taxes to the Board of Equalization are discharged under these same rules.

Ninth, since October 17th, 2005, taxes are treated the same in both Chapter 13 and Chapter 7. Sucks but there it is.

Call to see if a Bankruptcy is Right for you 951 200 3613. Taxes are not something that you can pussyfoot around with in a bankruptcy. This essay is for entertainment purposes only. You may not rely on the information and it does not create an attorney client relationship between me and you, the reader. If you have tax issues, be prepared to pay a lot more for your bankruptcy. If you have tax issues, and the attorney you interview does not know these rules, go to someone else.
Answer Applies to: California
Replied: 8/11/2010
Diefer Law Group, P.C.
Diefer Law Group, P.C. | Abel Fernandez
You might be able to discharge your personal income. But taxes are pretty hard to discharge. For more information, call me.
Answer Applies to: California
Replied: 8/11/2010
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