Often, my clients are surprised to find out that some taxes are dischargeable in bankruptcy. Generally income taxes are dischargeable if they meet certain time or age limits.
- They must be for a tax year for which the return was due more than 3 years prior to filing bankruptcy. Example: Today is March 11, 2011. Taxes for the year 2007 were last due on April 15 or October 15 (extension date), 2008. Therefore they meet this timeline.
- The tax return must have been actually filed by the debtor and have been on file with the IRS for at least 2 years.
- Any assessment the IRS makes must be at least 240 days old plus any time an offer in compromise was outstanding.
- These times may be extended for any period in which the debtor was previously in bankruptcy.
Some taxes are simply not dischargeable — for example, taxes assessed against you for taxes you withheld from your employees. Also, the 5th Circuit Court of Appeals has held that if you filed the tax return after the extension date, the tax is not dischargeable.
A NOTE ABOUT LIENS. If the IRS or other taxing authority has filed a lien, the property to which the lien attached (e.g. your homestead) may not be discharged even if you are. That means that the IRS or other taxing authority may take the collateral even if they could not take anything else from you.
Be sure to talk to your Texas bankruptcy lawyer about taxes.