You may have heard that taxes can never go away in bankruptcy. That is a myth. Some older income tax debt can be wiped out in Chapter 7 or Chapter 13. The answer depends on a few key dates, not on luck.
How the timing rules work
Three tests decide if your income tax debt can be discharged. Lawyers call them the 3-2-240 rules. Your tax must pass all three. The 3-year rule means the return was due at least three years before you file. Count any extensions. The 2-year rule means you actually filed the return at least two years before you file for bankruptcy. The 240-day rule means the IRS assessed the tax at least 240 days before you file. Miss one test and that tax year does not qualify. Pass all three and the tax may be discharged like other unsecured debt.
The mistake that trips most people up
People often have the right tax year but the wrong date. The 240-day clock runs from the assessment date, not the date you filed. An audit or an amended return can start a new clock. So can an offer in compromise. Before we set a filing date, we pull your IRS account transcript and read the real assessment dates. One wrong date can cost you the discharge.
What taxes do not qualify
Not every tax can be erased. Payroll and trust fund taxes usually cannot. Tax debt from a fraudulent return or willful evasion cannot. Tax years where you never filed a return cannot. Recent income taxes also stay. If your tax is too new for Chapter 7, Chapter 13 can fold it into a 3 to 5 year payment plan.
About tax liens
A discharge wipes out your personal duty to pay an old tax. It does not remove a tax lien that the IRS recorded before you filed. The lien can stay attached to property you already own. We review your file for liens before you file so there are no surprises.
Why work with Nick Thompson on tax debt
Nick Thompson holds U.S. Tax Court License number 51. He has practiced law for more than 35 years, in Kentucky since 1991. Few bankruptcy lawyers also handle tax matters at this level. We file cases for clients in Jefferson, Oldham, Bullitt, Spencer, Nelson, and Meade counties.
Call 502-625-0905 to set up a free consultation. We will pull your transcripts and tell you, in plain English, which tax years can go away.
Frequently Asked Questions
Yes. State income taxes follow the same 3-2-240 timing tests as federal taxes. We check both
when we review your transcripts.
Yes, but the missing returns must be filed first. A year with no filed return cannot be discharged.
We will map out the order to file so your debt can qualify.
Not automatically. A discharge ends your personal liability, but a recorded lien can stay on the
home. We review lien timing before you file and explain your options.
Yes. The first consultation is free. Call 502-625-0905. Our office is at 800 Stone Creek Parkway,
Suite 6, open Monday through Friday, 9 a.m. to 5 p.m.