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Bankruptcy FAQ

Tax season is close, so let’s discuss discharging tax debt

On Behalf of | Jan 23, 2018 | Chapter 7

The calendar has turned to 2018, and with that comes your long-awaited W-2s in the mail (or electronically if you signed up for it). That means it’s tax time, and this can be a stressful and debt-filled period of time for many people. They may be worried about the taxes they are about to owe, or they may be concerned about past tax debt that clouds their future.

Tax debt can cause considerable financial stress for thousands and thousands of people every year. However, there are ways to deal with your past tax debts through bankruptcy. Your tax debt can be discharged through Chapter 7, but there are certain guidelines and requirements that must be met in order for the filer to qualify.

If you are seeking to discharge your tax debt through Chapter 7, there will be a number of factors that matter. The type of tax, the age of your tax debt, the type of bankruptcy, and whether you actually filed a tax return before or not will all greatly impact your eligibility.

In addition, you must meet the following conditions to have your debt discharged through Chapter 7 bankruptcy:

  • The discharge must be for income taxes, because payroll taxes and penalties are not eligible.
  • You must have filed a tax return for the years you are requesting a discharge. If you didn’t submit a filing, you can’t get the debt discharged.
  • No tax evasion was committed and the debt is at least three years old.
  • You must be eligible under the 240-day rule, which means that the IRS assessed your debt at least 240 days before you filed for bankruptcy.