The three general rules for taxes to be discharged in a Chapter 7 bankruptcy are the following:
1. The taxes must be three years old, computed from the most recent date the tax return was due, typically April 15 of the year following the taxable year. Note: if extension was filed the three year time frame starts as of the extension time frame, typically October 15, even if the tax return was filed prior to October 15.
2. The tax return must have been filed more two years preceding the filing of the bankruptcy. Note: was there a Substitute return filed by the services, prior to the taxpayer actually filing thier own return, if yes, even if the rules are met the taxes may not be discharged.
3. The tax claim was assessed at least more than 240 days preceding the filing date of the bankruptcy.
While these are the three general rules, there are many areas to be wary of when determining the dischargaablity of taxes. A complete review of the tax transcripts should be the first step in the reveiw process. A tax trascript can be acquired from the IRS by calling to request a trascript be faxed or mailed. The transcript should be reviewed to determine the date of filing the tax return, any extensions filed, any tax liens filed, any fraud penalties.
Even if the taxes are discharged in bankruptcy, if a lien has been filed, it will attach to the pre- petition assets and survive the bankruptcy.
