Jump To Navigation

Blog Post

How to make the IRS disappear - at least for a while...

Posted by: Paula Greenway
June 27, 2008
Topic: Discharging Taxes in Bankruptcy

Yes, it is possible!  You can discharge (wipe out) federal income tax debt through Chapter 7 bankruptcy, but only if you meet all of the following conditions:

  • The taxes are income taxes. If the taxes are a type other than income tax, such as payroll taxes or fraud penalties, they cannot be eliminated in bankruptcy.
  • You did not commit fraud or willful evasion. If you filed a fraudulent tax return or willfully and intentionally attempted to avoid paying taxes, such as using a false Social Security number on your tax return or providing false information, bankruptcy can't help you escape taxes. 
  • The debt is at least three years old. To discharge a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy protection.
  • You filed a tax return. You must have actually filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.
  • You pass the "240-day rule." If the income tax debt has been assessed by the IRS, it must have been at least 240 days before you filed your bankruptcy petition, or the taxes must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity due to an offer in compromise or a previous bankruptcy filing.)

You Can't Discharge a Federal Tax Lien

If your taxes meet the qualifications for discharge in a Chapter 7 bankruptcy case, you still have one more hurdle to cross. Bankruptcy cannot wipe out prior recorded tax liens. Chapter 7 bankruptcy will wipe out the obligation you personally have to pay the debt, and prevent the IRS from seizing your bank account or wages, but if the IRS recorded a tax lien against your property before you file for bankruptcy, the lien will remain on the property even after the bankruptcy is discharged. Bottom line, you will have to pay off the tax lien in order to sell the property.  However, if you don't sell, the lien sits quietly waiting until you do.


Subscribe

  • RSS 2.0 Feed
  • My Yahoo!
  • Sub Bloglines
  • MyFeedster
  • newsgator
  • My MSN

What is RSS?
Office Location

Greenway Law, LLC, 310 Richard Arrington Jr. Blvd N., Suite 400, Birmingham, AL 35203, Phone: 205-324-4000, Fax: 205-326-1150

Greenway Law, LLC

Bankruptcy lawyer Paula Greenway serves clients in the Birmingham area, including Hoover, Bessemer, Vestavia Hills, Alabaster, Trussville, Springville, Center Point, Chelsea, Calera, Columbiana, Gardendale, Fultondale, McCalla, Pelham, Mountain Brook, Homewood, Oneonta, Jefferson County, Shelby County and Blount County in Alabama.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

The following language is required pursuant to Rule 7.2, Alabama Rules of Professional Conduct. No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers. This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

FirmSite® designed and hosted by Thomson-FindLaw.