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Can taxes be discharged in bankruptcy?

On Behalf of | Mar 2, 2015 | Personal Bankruptcy |

In Ohio, many people struggling with debt are also facing the challenge of tax payments. When debts from credit cards and other sources start to pile up, it can be difficult to make tax payments. These missed payments will start to create tax debts and penalty charges that make a debt problem tougher. It may be possible to discharge some of these tax debts by filing for bankruptcy.

A person who files for Chapter 7 bankruptcy may be allowed to discharge some or all of their outstanding debts. This can be a significant advantage to anyone who is trying to get a fresh start after falling into debt. Most types of bankruptcy will have little or no effect on tax debts. However, Chapter 7 bankruptcy may discharge tax debts that meet certain conditions.

In order to qualify for discharge under Chapter 7, tax debts must meet several requirements. First, the taxes to be discharged must be federal income taxes. The debtor must have properly filed a tax return for the years in question at least two years before filing for bankruptcy. The debt must have been declared by the IRS 240 days before bankruptcy was filed and the debt must be at least three years old at the time of bankruptcy filing.

The debtor must not have attempted to evade taxes or commit tax fraud on any of the tax returns in question. In some cases, if a tax debt is successfully discharged, the penalties for non-payment of that debt will also be removed.

Bankruptcy can eliminate debt, but it is a complex process. An attorney may be able to help a client file bankruptcy by explaining procedures and giving advice about how to apply for tax debt discharges.


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