IRS tax debts cannot normally be discharged by bankruptcy. You can only eliminate tax debt with a Chapter 7 bankruptcy if you meet all of the following criteria: 

The money you owe is for income taxes. Payroll taxes and all penalties cannot be discharged, no matter what.

You did not commit fraud or tax evasion. Your debt must arise from a legitimate accident or a simple inability to pay.

Your debt is at least three years old. You cannot discharge IRS debts unless they are at least three years old at the time you file your bankruptcy.

You filed a tax return for the years in which the back taxes are owed: Non-filers receive no clemency.

You pass the "240-day" rule. This means that your tax debt must have been assessed at least 240 days prior to your bankruptcy, or it has not been assessed yet.

If you do not meet all of the above criteria, then you will still owe the IRS 100% of what's due following a Chapter 7 bankruptcy. Tax debts can be part of a Chapter 13 bankruptcy, but you do not get to lower the total amount due - you will still owe the outstanding balance at the completion of your Chapter 13 program. In short, it is much better to pursue one of the options outlined below if you have overwhelming tax debt.


Personal, reliable tax relief service from professionals.

Copyright © 2010 Blue Sky Tax Relief. All Rights Reserved.