Bankruptcy Lawyer | Discharging Taxes in Bankruptcy

Bankruptcy Lawyer.  Bankruptcy clients who I represent in Florida, are sometimes able to discharge certain tax debts, Pinkston & Pinkston Law Firm.

Personal income tax becomes dischargeable under what is commonly referred to as the ‘three year rule’ pursuant to Bankruptcy Code Section 507.

There are five considerations in determining whether the taxes are subject to discharge:

THREE-YEAR RULE. The most recent date the tax return is due is

over 3 years before the year the bankruptcy is filed. For federal taxes this is typically

April 15 or October 15 of the applicable year. 11 U.S.C. § 507(a)(8)(A)(i).

240-DAY RULE. The tax must have been assessed more than 240

days before the bankruptcy is filed. 11 U.S.C. § 507(a)(8)(A)(ii).

TWO-YEAR RULE. The Debtor must have filed or given his/her

1040 tax return (or equivalent report or notice) more than 2 years before the

bankruptcy is filed. 11 U.S.C. § 523(a)(1)(B)(i) or (ii).

NO FRAUD. The Debtor’s tax return must not have been

fraudulent. 11 U.S.C. § 523(a)(1)(C).

NO TAX EVATION. The Debtor must not have attempted to avoid or defeat the tax. 11 U.S.C. § 523(a)(1)(C).

In getting a determination of dischargeability, it is essential to obtain an account transcript from the IRS in order to obtain assessment dates and other information.

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