{"id":3353,"date":"2016-05-09T22:47:00","date_gmt":"2016-05-09T22:47:00","guid":{"rendered":"https:\/\/socal.law\/?p=3353"},"modified":"2022-02-14T22:35:03","modified_gmt":"2022-02-14T22:35:03","slug":"are-taxes-dischargeable-in-bankruptcy","status":"publish","type":"post","link":"https:\/\/socal.law\/are-taxes-dischargeable-in-bankruptcy\/","title":{"rendered":"Are Taxes Dischargeable in Bankruptcy?"},"content":{"rendered":"\n

One of the most prevalent misconceptions that people have about bankruptcy is that you cannot discharge tax debts under a Chapter 7 discharge. Chapter 7, the \u2018liquidation\u2019 bankruptcy, is the most common bankruptcy chapter and the one people most often assume when thinking of bankruptcy. You can, in fact, discharge income tax debts if they meet all of the criteria outlined below.<\/p>\n\n\n\n

  1. The tax debt is income-based. Income taxes are the only type of tax debt dischargeable under Chapter 7. In order for taxes to be dischargeable, the tax debt must be for federal or state income taxes or taxes on gross receipts.<\/li>
  2. The tax debt is at least three years old. To eliminate tax through Chapter 7, the tax debt must be from a tax that was due at least three years ago. This date includes all valid extensions. For instance, if taxes were disclosed in a 2015 tax return for which extensions to file the return expired on October 15, 2016, the due date test will be satisfied only if the bankruptcy petition is filed after October 15, 2019.<\/li>
  3. The tax return was filed at least 2 years ago. If you wish to discharge tax ability, you must have filed your return at least two years before filing your Chapter 7. In most courts, a late return (when the IRS filed a substitute return on your behalf after all of your extensions expired) does not \u201ccount\u201d as a return and thus the tax debt is deemed to be nondischargeable. In some courts, however, you can discharge tax debt even if you file a late return, assuming you meet the other criteria outlined here. In general, San Diego bankruptcy tend to allow debtors to discharge tax returns filed after all extensions expired, if they meet all other criteria.<\/li>
  4. The \u201c240-Day Rule\u201d. To discharge tax debt, the taxing authority must have assessed the tax (entered the liability on the taxing authority\u2019s records) against you at least 240 days before you filed bankruptcy. This time limit may be extended if there was an offer in compromise between the taxing authority and you, or if you had previously filed for bankruptcy.<\/li>
  5. No fraud or willful evasion. You cannot receive a discharge of tax debt if you have been deemed guilty of any intentional act of evading any tax law. if you file a joint return, the taxing authority must prove that both you and your spouse committed an act of fraud related to the applicable return or willfully attempted to evade the tax in order to deny a discharge of the tax debt.<\/li><\/ol>\n\n\n\n

    To put all of this is a nutshell, if your tax debt is income-related, from 3 or more years ago, and you filed your return(s) relatively timely without any major incidents or problems, your tax debt is likely dischargeable under Chapter 7.<\/p>\n\n\n\n