One question I am often asked is whether people can get out from under an onerous tax burden by filing bankruptcy, either in a chapter 7 or a chapter 13.  Trust fund penalties aside for unremitted payroll tax deductions, it is possible to discharge (wipe out) income taxes under certain circumstances.

However, those circumstances are far from straightforward and should be reviewed with care by an attorney.

When Are Taxes Dischargeable?

So what are those circumstances? Taxes can be discharged the return for that year 

  • was due at least three years before the filing of the petition
  • was actually filed two years before the filing of the petition, and
  • the taxes were assessed at least 240 days before the filing of the petition,

But there is a twist to this!

Suppose you haven't paid all of the income taxes from tax year 2005, and the return for that year was filed on or before April 15, 2006. This would generally be dischargeable, as all three conditions have been met.

However, what if the return for 2005 was not filed until much later, such as January of 2008? It would have been filed more than two years ago, but arguably not "on time."

So What Do I Do?

As you can see, a careful analysis by an experienced bankruptcy attorney is needed in order to have the best chance of discharging income tax. You need to discuss this with an experienced bankruptcy attorney to see if discharging that tax is still possible.

If you live here in southern New Jersey, owe taxes to the IRS or New Jersey, and are looking to see if bankruptcy can help you, please feel free to call my office at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.

If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

Not sure if bankruptcy is right for you? Take the quiz to the right to find out more!

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.