How to Discharge Income Taxes in Bankruptcy

Delinquent income taxes may be discharged in bankruptcy, if the right criterea apply. This guide will give you a general idea of what is required to discharge income taxes in a bankruptcy case. Caveat: Always check with an expert before making decisions or taking any action.

How to Discharge Income Taxes in Bankruptcy

Taxes owed to the United States or any state, county, or other governmental entity are normally nondischargeable, however, income taxes may discharge if all of the following criteria are met: 1. The taxes are more than three years old at the time the Bankruptcy was filed. (The three-year period begins to run from the time the returns were due, plus any periods of extension); For example, a return is normally due on April 15th of the following year, sometimes even later, (so find out). 2. If the return was not filed on time, more than two years has expired since the return was filed; 3. If there was an assessment, more than 240 days have expired from the date of the assessment before the bankruptcy is filed; 4. There has been no fraud. 5. Tax liens are not automatically removed, even if the tax itself is dischargeable. However, the lien on a tax that is discharged will not affect new assets acquired by the debtor after a discharge.

How to Get Your IRS Tax Transcript

1. Caveat: If you intend to discharge taxes with your bankruptcy filing, we recommend that you obtain a complete history of your tax obligations for each specific year in question from the I.R.S. and consult a tax professional before filing the bankruptcy. To get your Federal IRS tax history, call the IRS at 800-829-1040and ask them for a report called MFTRA-X. Tell them you want the MIFTRA-X for each year that you owe them for. They will mail you the reports, and might even fax them if you ask them nicely. Also note that a bankruptcy discharge does not automatically remove any filed or recorded tax lien on any property which you own. Yous should also contact the state income tax authorities if you owe any state taxes, for similar information about your state income tax debts. 2. Always consult with an expert before taking any legal action, to be sure that your analysis and interpretation is correct.