Tax Bankruptcy

Many people and many attorneys believe that taxes are not eligible for discharge in Bankruptcy.  That is 100 percent false!  Certain rules must be met, but if they are taxes ARE eligible for discharge in a Bankruptcy.

There is 3 year rule, two year rule and 240 day rule for the taxes to be eligible for discharge.  The criteria is explained below:

  • The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy.
  • You did not commit fraud or willful evasion. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, such as using a false Social Security number on your tax return, bankruptcy can't help.
  • The debt is at least three years old. To eliminate a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy.
  • You filed a tax return. You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.
  • You pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity because of an offer in compromise or a previous bankruptcy filing.)

At Flat Fee Attorneys we can sit down with you and have the ability and knowledge to determine if your taxes qualify for BK.  Many people ask “well I make too much money for a chapter 7, so what do I do now?”  Even if you think you make too much for a chapter 7, there are loopholes in the system that allow us to have high wage earning individuals with large tax debt to use a chapter 7 to discharge their taxes.

Schedule a free consult today with one of our tax professionals so we can discuss your options for a tax bankruptcy.  Call 702-388-FLAT