TAXES OWED TO THE IRS COULD BE DISCHARGED IN A CHAPTER 7 BANKRUTPCY
Nobody wants to file for bankruptcy. However, circumstances can spiral out of control and you find yourself without any choice. You were laid off from work or had unexpected medical bills. You had to make a choice between paying the monthly credit card bills or putting food on the table. The choice is easy. When you realize that you can’t keep up with your credit card payments, you consult your bankruptcy attorney.
The 3 year rule: When did the taxes become due?The first question to ask is "When were the taxes due that were not paid?" If they became due at least three years before the bankruptcy case is filed, you have satisfied the "3 Year Rule". Bankruptcy Code ?507(a)(8)(A)(i)
Generally, the date that taxes are "due" is April 15th of the year next succeeding the year that the income was earned. For example, taxes are due for income earned in 2015 on April 15, 2016. A bankruptcy case to discharge those taxes owed, can be filed on or after April 15, 2019, three years after the date that the taxes became due.
In the event you obtain an extension of time to file your tax return, then the 3 year period begins from the date that the taxes are due under the extension.
The 2 year rule: failure to file your return on timeIf you owe income taxes and did not file your tax return on time, then you cannot include those unpaid taxes in your bankruptcy case unless your tax return was filed at least two years before you filed your bankruptcy case. Bankruptcy Code ?523(a)(1)(b)(ii)
Even if you file your tax return late, you still have the right to include those taxes in your bankruptcy case if it is at least two years since the date that you filed the return.
The 240 day rule: the date your taxes were assessed
There is another rule that you must comply with even if you pass the 3 year rule and the 2 year rule: This is called the "240 day rule". This rule states that the client's taxes must have been assessed by the taxing agency at least 240 days before the bankruptcy case is filed in order for the owed taxes to be discharged in bankruptcy.