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Photo of attorneys Shelley Slafkes and Bruce Levitt
Photo of attorneys Shelley Slafkes and Bruce Levitt
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On Behalf of | Mar 4, 2019 | Bankruptcy Basics, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

If you are one of the many Americans who struggle with debt, then you intimately understand the emotional strain that comes with ceaseless harassment from debt collectors. Despite your best efforts and hard work, you find yourself unable to keep up with credit card payments, interest, medical bills, your mortgage, or even your utilities. For a lot of people in your situation, bankruptcy is a desirable step to obtaining lasting relief from qualifying debts.

Are Taxes Dischargeable Through Bankruptcy?

Qualifying debts generally means unsecured debts, such as medical debts, credit card debts, and loans that are unattached to collateral. But what about federal income taxes, are those dischargeable as well? This is an important question, because taxes represent a significant financial obligation for many Americans and make things all the worse when a person is struggling with debt. The answer is not a simple yes or no.

Under both Chapter 7 and Chapter 13 Federal income taxes may be dischargeable. In order to obtain the discharge of Federal income taxes, the debtor must demonstrate the following to the bankruptcy court:

  1. That the federal tax obligation is for income taxes. Other types of federal taxes are not dischargeable.
  2. The delinquent income tax is at least three years old–meaning it was owed to the IRS at least three years prior to the bankruptcy filing.
  3. The “240 Day Rule” applies, which means that the IRS must have assessed the relevant tax debt against the debtor at least 240 days prior to the bankruptcy filing.
  4. The debtor has filed proper tax returns for at least the past two years prior to filing for bankruptcy relief.
  5. Fraud or tax evasion is not in any way implicated in the delinquent income taxes.

Chapter 13 bankruptcy offers the added advantage of forcing the government to accept a payment plan to repay those taxes that cannot be discharged. Notably, even if a debtor’s federal income tax obligation is discharged, any tax lien that the IRS has obtained remains effective against the debtor’s property.

Let Us Help You Move Forward

If you are struggling with debt, contact Levitt & Slafkes, P.C. For over thirty years, we have guided many clients through the bankruptcy process, helping them to obtain effective debt relief. You have options, and we will consider your specific needs and circumstances to help you formulate a plan. You deserve relief and we want to help you. Call our office today at (973) 323-2953 to schedule an initial consultation, or reach us online.

We are proudly designated as a debt relief agency by an Act of Congress.  We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years.