Debt Relief

Property & Assets

Bankruptcy FAQ

Tax debts can be discharged, but only in specific circumstances

On Behalf of | Oct 22, 2017 | Personal Bankruptcy

There are many different forms of debt. You can be indebted to credit card companies. You could owe money due to a medical emergency. You could have student loans, or car loans, or a mortgage. Debt comes in many, many different forms, and knowing how to tackle them is imperative to filing for bankruptcy — or to avoid falling into inescapable debt in the first place.

But today we want to talk about a form of debt that we didn’t mention above that can cause problems: tax debt. During the discharge process of bankruptcy, not every form of tax debt may be automatically discharged. Income tax debt can be discharged through the bankruptcy process, but five condition must be met to qualify. They are:

  • Your tax return must have a due date that is at least three years old
  • Your tax return must have been filed two years ago
  • The assessment must be at least 240 days old
  • There must be no fraud involved
  • There must be no tax evasion involved

There are also plenty of tax debts that can’t be discharged at all, such as:

  • Payroll taxes and fraud penalties
  • Any penalties resulting from tax debt that couldn’t be discharged
  • Tax obligations from years where you failed to file tax returns or filed late
  • Any taxes relating to trust funds
  • Any taxes withheld from a paycheck 

If you are struggling with your tax debt and are in need of help or you want advice on how to deal with your situation, please consult with the McBride Law Firm.