Kentucky Bankruptcy Law

Counsel with Care

Discharge tax debt? Yes, you can…

I had a phone conversation just last week with an attorney who was surprised to learn that income tax debt can be discharged. I guess he had not read my prior post about this topic. The mistaken belief that tax debts are with you forever is prevalent with lay people and attorneys alike. The bankruptcy code takes one through a bit of a maze to figure out if the tax debts in question are capable of discharge. The code provisions include: 11 USC Sect 507(a)(8)(A)(i) & (ii), 523(a)(1)(B) & (C), 1328(a)(2).

The condensed summary of these provisions includes:

  1. The due date for the tax return was three years ago or more.
  2. The tax return was actually filed two years ago or more.
  3. The tax assessment occurred 240 days ago or more or has not yet occurred.
  4. The tax return was not fraudulent.
  5. The taxpayer did not engage in tax evasion.

One needs to obtain a tax “Account Transcript” to be sure to calculate these requirements because certain things can “toll” or stop the running of these times.


July 27, 2012 - Posted by | Bankruptcy, Chapter 13, Chapter 7, Planning, Pre-filing planning | , , , , , , , ,

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