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Can I Discharge Back Taxes in Bankruptcy?

In order to discharge what you owe the IRS, you must satisfy SIX conditions.  If you satisfy all of them, you can get a discharge of the tax debt, penalties, and interest.

The Six Conditions Are:

  • The due date for filing the tax return was not less than three years ago.
  • The tax return was filed at least two years ago.
  • The tax assessment is at least 240 days old.
  • The tax return was not fraudulent.
  • The taxpayer is not guilty of tax evasion.

For Example:

Bill files for bankruptcy on April 15, 2009.  He filed a legitimate and honest tax return in 2005 for the 2004 tax year.  Unfortunately he just couldn't pay the taxes he owed.  The IRS assessed the tax a year later.

-Bill meets the first criteria because he filed his return more than three years before his bankruptcy.

-Bill meets the second criteria since the return in question was filed more than two years before his bankruptcy.

-Bill meets the third criteria because the IRS assessed the tax more than 240 days before the bankruptcy was filed.  (Assessed means the IRS issued a notice that he owes taxes for 2004.

-Bill met the fourth and fifth requirements because he was honest in his return and isn't trying to evade his tax liability.  He just can't afford to pay them. 

Bill isn't completely done yet.  He has one more obstacle.  He must demonstrate that he has filed his four tax returns previous to the filing of his bankruptcy.  That means he must have filed returns for 2008, 2007, 2006 and 2005.

When trying to discharge debts, timing is critical.  If you owe the IRS taxes, please feel free to contact the Law Office of Conrad Willkomm, P.A.  and take advantage of our free consultation!