I recently filed for Chapter 7 and am awaiting my 341 meeting. One of my debts is income taxes, from what I understand income taxes can be discharged if the tax liablity was due over three years before bankruptcy has been filed and if the IRS has not assesed liablity in the past 240 days. How to I file complaint to determine dischargeability of debt?
You have part of the puzzle in discharging taxes in a bankruptcy. Here are the six rules for discharging income taxes in a Chapter 7:
(1) THE THREE-YEAR RULE: most recent due date for filing the return is more than 3 years old. Three-year period is computed from most recent date the tax return is due for the the tax year. An extension to file the return delays the start time.
(2) THE TWO-YEAR RULE: The tax return has been filed or given by the taxpayer at least 2 years preceding the filing date of the bankruptcy.
(3) THE 240-DAY RULE: Tax claim was assessed at least more than 240 days preceding the filing date of the bankruptcy.
(4) TAX IS ASSESSABLE BUT NOT YET ASSESSED: Usually involves consent to extension to assess.
(5) NON-FRAUDULENT RETURN: Tax return in question was non-fraudulent.
(6) NO WILLFUL TAX EVASION: Taxpayer has not engaged in activity deemed a willful attempt to defeat or evade the tax.
Provided you met all of the above rules, your income taxes should be dischargeable in your Chapter 7 bankruptcy upon you receiving a discharge. There is no need for you to file a complaint to determine the dischargeability. The IRS, however, could file a complaint to object to the discharge if any of the above rules are not met according to your tax transcripts.
Other issue to consider: Any tax liens on your property? If so, the tax lien will remain despite the discharge of the taxes.
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11 lawyers agree
One could file an adversary proceeding complaint to "challenge" the dischargeability of a debt, but you as the debtor would not be filing an adversary proceeding complaint to "determine" the dischargeability of your own debt.
The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author (who is only admitted to practice law in the State of California). For specific advice about your particular situation, consult your own attorney.
Usually if your tax liability is dischargeable, the IRS will concede it. Your schedule E should separate out how much of the taxes are entitled to priority, and how much are not. You should contact the IRS Bankruptcy section and determine if the two of you see eye to eye.
9 lawyers agree
I agree with my colleagues. I would like to add one item - If your taxes do not meet the six item test, the IRS need not file an adversary to determine the taxes are non-dischargeable. The taxes simply are not discharged - the IRS need not take ANY action in the bankruptcy court.
I hope this helps.
Steven A. Leahy
Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-client relationship is created or is intended to be created hereby. You should contact a local attorney to discuss and to obtain legal advice.