• Heather A. Harwell, Esq.

Q: Can I Discharge Federal Income Tax Debt in a Chapter 7 Bankruptcy?

The answer to this question depends upon several factors. Generally, recent federal income tax debt and federal income tax debt that has been converted to a lien on your property is NOT DISCHARGEABLE in a Chapter 7 Bankruptcy. However, your federal income tax debt may be DISCHARGEABLE if the following applies:


1. The taxes must be federal or state income taxes; AND


2. The taxes are at least 3 years overdue. This date is calculated from the date the taxes were actually due but if an extension was granted, this may affect when the 3 year period begins (11 U.S. Code §507(a)(8)(A)(i)); AND


3. The tax return generating the federal income tax debt must be filed at least 2 years before the day you file for Chapter 7 Bankruptcy (11 U.S. Code §523(a)(1)(b)(ii).); AND


4. The amount of federal income tax due must be assessed at least 240 days before the day you file for Chapter 7 Bankruptcy, which, in most cases, is the date the tax return was filed. However, corrections, disputes and audits may affect when the 240 day period is calculated (11 U.S. Code § 507 (a)(8)(A)); AND


5. The tax debt must not have been converted to a tax lien on your property (United States v. Bess, 357 U.S. 51 (1958); United States v. Stern, 357 U.S.39 (1958). ); AND


6. The tax returns generating the debt must not be fraudulent and you cannot be guilty of intentional tax evasion. 11 U.S. Code § (a)(1)(C); 11 U.S. Code § (a)(2).


NOTE: The information provided on this website is provided as a general reference and not intended to be relied upon as tax advice or legal advice. Do not make any legal or tax decisions based upon the information provided within this website. To determine how the laws apply to your particular financial and/or legal situation, you are encouraged to consult with an experienced attorney, accountant and/or tax professional.