The IRS generally has 10 years from the date taxes were assessed to collect. In order to discharge federal individual income taxes in a chapter 7 bankruptcy, there are five requirements you must meet.
First, the bankruptcy must be filed more than 3 years after the due date for filing the return. This date may change depending on whether you obtained any extensions to file.
Second, you must have filed your tax return at least more than two years before filing for bankruptcy. However, this rule applies only to late filed returns.
Third, the taxes must have been assessed more than 240 days before the bankruptcy was filed. Determining when taxes were “assessed” can be tricky. Taxes are assessed when the IRS makes an entry on its records concerning the amount owed.
Fourth, you cannot be found to have attempted to evade the tax. For instance, have you failed to file a return? Some courts have ruled that intentionally failing to file returns is willful evasion. And Fifth, that your return was not fraudulent.
Discharging taxes can be achieved, and for some, it could mean a considerable financial burden lifted. However, discharging taxes is not an easy thing to do and most always requires some agreement with the taxing authority as to discharge of the taxes. In other words, discharge is not automatic just because the above factors are met. You need an experienced chapter 7 bankruptcy attorney to see if your delinquent taxes can be discharged.
Attorney Profile: Janet Spears, Bankruptcy Lawyer