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Can I Discharge IRS and State Tax Debt in Bankruptcy

A common question I get is whether one can discharge IRS and State income tax debt in bankruptcy.

Simply put, Debtors must meet ALL of the following criteria to discharge taxes in a CHAPTER 7 Bankruptcy:

1. Income taxes are at least three years old from the date they were due (e.g., 2010 taxes came due on April 15, 2011).
2. Tax Return was filed at least two years ago.
3. Taxes must have been assessed by at least 240 days prior to the filing of your bankruptcy.
4. Tax Return was not fraudulent.
5. Taxpayer did not willfully evade taxes.

Provided that one meets all of foregoing criteria to discharge taxes and qualifies to file a chapter 7 bankruptcy, he/she must wait until at least April 16, 2014, to attempt to discharge 2010 (and older) individual income taxes in a chapter 7 bankruptcy.

I will cover how tax liabilities are covered in a Chapter 13 Bankruptcy in the coming weeks.