Can Tax Debt Be Discharged?

The federal government generally does not like to discharge tax debt. They give two reasons for this: 1) taxes are each income-earning citizen's patriotic obligation and 2) taxes are their main source of income. Discharging tax debt is difficult, but through bankruptcy it is possible under certain circumstances.

Attorney James H. Monroe in Central Florida has practiced bankruptcy law for more than 30 years. He is certified in bankruptcy law by the American Board for Certification. He has the experience necessary to answer your questions and help you discharge income tax and other tax debt. To schedule an appointment for a free consultation, call 407-872-7447 or contact our firm online.

General Rules for Discharging Tax Debt

The rules for having tax debt discharged are very complicated. A consultation with a tax professional may be necessary to determine if you qualify. However, there are a few general guidelines that you will need to follow:

  • The taxes to be discharged must have been "due and owing" for more than three years before you file your bankruptcy petition.
  • You need to have filed your tax returns before you file the bankruptcy petition. Tax returns filed on your behalf by the taxing authority do not count as returns filed by you.
  • The IRS needs to have assessed your taxes 240 days prior to the day you file the bankruptcy petition. The IRS "assessment" refers to the agency's internal acknowledgment of the overdue tax debt. You can find out if you have been assessed by ordering a transcript, but most of our clients have already received notices telling them they have been assessed. Be careful in your calculations; if an offer in compromise is pending during the 240-day period, that time must be added on, totaling a 240-day period plus 30 days.
  • There cannot be any attempt on your part to defraud the IRS by not paying taxes. You must be genuinely unable to pay.

Debt Relief From Taxes

Taxes that cannot be discharged under Chapter 7 may be eligible for repayment without penalties or interest over the course of a Chapter 13 bankruptcy. If you have tax liens, however, special rules apply. You should discuss this with a lawyer.

To schedule an appointment for a free initial consultation with attorney James H. Monroe, call us today at 407-872-7447 or contact our offices online. We are ready to help you along the path to debt relief and recovery.