Debt Relief

Property & Assets

Bankruptcy FAQ

Eliminating Tax Debt

Tax debts are not automatically dischargeable in Chapter 7 or Chapter 13. But certain tax debts can be discharged. In cases of federal income tax debt, you must satisfy all five of these requirements:

  1. The due date for filing a tax return must be at least three years ago.
  2. The tax return must have been filed at least two years ago.
  3. The tax assessment must be at least 240 days old.
  4. The tax return must not be fraudulent in any way.
  5. The taxpayer must not be guilty of tax evasion.

If all five of these conditions are met, income tax debt may be discharged.

Chapter 7 bankruptcy offers better opportunities for discharging tax debt than Chapter 13 — because Chapter 7 is a liquidation, while Chapter 13 is about stretching out payments.

Taxes That May Not Be Discharged

  • Payroll taxes and penalties for fraud are never dischargeable.
  • Tax penalties from tax debt that was ineligible for discharge may not be discharged. (But penalties on dischargeable tax debts may be discharged.)
  • Tax obligations for years in which you failed to file tax returns may not be discharged.
  • Trust fund taxes may not be discharged.
  • Taxes withheld from an employee’s paycheck may not be discharged.

The laws governing eliminating tax debts are complex. If you have questions about a tax debt, stop by our Jackson Street offices in Alexandria and ask one of our lawyers what your options are. Or talk to our attorneys at 318-625-0471.