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  • Writer's pictureJennifer Nicole Jines

Are taxes discharged in chapter 7 filing?

Updated: May 22, 2019

Many people wonder if taxes can be discharged in a chapter 7 bankruptcy? The answer is possibly, as long as the following criteria is met:

Only income taxes can be discharged. payroll taxes or fraud penalties, can not be discharged in bankruptcy. Only income taxes qualify.

A fraud or willful evasion is not committed. If a fraudulent tax return is filed or there is a willful attempt to evade taxes, such as identity theft or using a false SS or EI numbers on your tax return, bankruptcy won't discharge those taxes.

Three years or more has passed since the due date or the date of filing AND at least two years has passed since the filing of the return. The tax return must have been originally due at least three years before bankruptcy is filed. If a tax return is not filed, for two years before filing for bankruptcy. In some courts, you can discharge tax debt that is the subject of a late return as long as you meet the other criteria.

The income tax debt must have been assessed by the IRS at least 240 days before you filing the petition. However, this time restriction can be extended if the IRS suspended collection activity because of an offer in compromise.

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