Can Tax Arrearages Be Discharged in Bankruptcy?
March 10, 2022 By: Carrie Weir
Can You Get Rid of Tax Debt in a Chapter 7 Filing?
Do you have an unpaid personal income tax debt that’s been hanging over your head for a while? Are you struggling to meet your other financial obligations, with the tax arrearage simply adding to your challenges? Have you considered filing for personal bankruptcy protection? Can a Chapter 7 bankruptcy petition help you resolve your tax debt?
Can You Discharge Income Tax Arrearages in a Chapter 7 Bankruptcy Filing?
There’s a common misperception that income taxes can never be discharged in bankruptcy. They can, but the process is arduous and the instances where you can wipe out existing tax debt are extremely limited.
The Prerequisites for Discharging Income Tax Debt
Tax arrearages can be extinguished under the following circumstances:
- The taxes must be income-based—They may be state or federal taxes, but they must be taxes that are due to your income. Payroll taxes are excluded.
- The return that generated the arrearage must have been due at least three years ago, with all valid extensions
- You must have filed a valid and accurate return at least two years before the date you filed for bankruptcy protection
- The taxed must have been assessed by the taxing authority at least 240 days ago
- There must have been no fraud or willful tax evasion
Tax Debts that Cannot Be Discharged in Chapter 7
Most other taxes are do not qualify for discharge, including property taxes, FICA and Medicare taxes, excise taxes and customs duties. Furthermore, while a Chapter 7 filing may lead to the discharge of tax debt, it has no impact on tax liens filed on any property that you own.
Contact an Experienced Rockwall, TX Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.