Most people don’t realize that income taxes can be discharged in bankruptcy. However there are rules that must be followed in order to determine whether or not a particular year can be discharged.

The basic rules are as follows:

1. At the time of the filing of the bankruptcy the tax debt must be at least three years from the date the tax return was due for that year.
2. At the time of the filing of bankruptcy it has been at least 2 years from the date the tax return, on which the balance is owed, was filed.
3. At the time of the filing of the bankruptcy it has been at least 240 days since the IRS last assessed the tax.
4. There was no fraud or willful tax evasion in connection with the tax debt looking to be discharged.

Even though there are 4 basic rules to discharging income tax, there are other events that can add time to the calculation of when a tax debt becomes dischargeable. Those events include, but are not limited to, requests for a collection due process hearing, the time in a prior bankruptcy, and the filing of an Offer in Compromise.
At Lothamer, our attorneys and CPAs have the ability to review IRS transcripts and determine whether or not the taxes you owe are dischargeable in a bankruptcy. Lothamer clients have saved hundreds of thousands of dollars over the years by utilizing the bankruptcy process to either eliminate or greatly reduce their tax debt.

If you are contemplating a bankruptcy, call Lothamer today to schedule a initial consultation.