Are Taxes Dischargeable Through Bankruptcy?


Some taxes are dischargeable through bankruptcy, but some are not eligible for discharge due to the year the taxes are due and the timeliness of filing the taxes.  If income taxes are more than three years old, they usually can be discharged.  The three year time period is based on the due date of the taxes, which generally is April 15th unless the debtor has been granted an extension.  If the taxes would be due within three years of the filing of the bankruptcy, the taxes would not be eligible for discharge.  It is not based on the end of the tax year but the due date for filing the tax return.  Therefore, if it is November, 2012, tax years 2008 and earlier would be discharged, but 2009, 2010, and 2011 would not because their due dates would be April 15th, 2010, 2011, and 2012, which is within the three year time period before the filing of the bankruptcy.


Even if the taxes are more than three years old, taxes are not dischargeable if they have been filed within the last 2 years.  If the taxes are not filed timely and less than two years before the filing of the bankruptcy, the taxes cannot be discharged through the bankruptcy.  If taxes are unable to be discharged through the bankruptcy, debtors can call the IRS or their state Department of Revenue and attempt to work out a payment plan to repay their non-dischargeable tax debt.  Sometimes debtors are able to pay the taxes over a longer period of time.  It is still important for debtors to list their tax debt in the petition regardless of the ability to discharge the debt, however, so the IRS and Department of Revenue will get notice of the bankruptcy filing.


For more information, please contact a St. Louis or St. Charles bankruptcy attorney today.