IRS Tax Discharge Explained

In some instances, tax liabilities can be discharged by filing bankruptcy. There are two main types of bankruptcy available (Chapter 7 and Chapter 13), each with definitive and complicated rules regarding discharging tax liabilities. In both instances, the following must be true:

  • Tax returns were timely filed or it has been at least 2 years since the returns were filed
  • Tax returns were last due to be filed for at least 3 years, including extensions
  • Tax liability was assessed at least 240 days before filing bankruptcy
  • Taxpayer did not pursue tax evasion or defeat
  • Tax liability is not due to a fraudulent tax return
  • Tax was not assessable at the time of filing bankruptcy
  • Liability is not due on Trust Fund Tax
  • Tax was unsecured

IRS Tax Expiration

The IRS has a legal time period of 10 years to collect on a tax debt. This time period begins on the date the tax is assessed and the statutory required notice letter is sent. If the collection statute date runs out, there’s a chance that your tax debt becomes null and void. However, Statute of Limitations of IRS debt can be drawn out in many situations. You should always double check, and never assume, that your debt has been removed due to the 10 year statute of limitations.

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2 comments on “IRS Tax Discharge Explained

  • He neglects to mention that the three year statute stops for the period of time an account is in offer in compromise or collection due process hearing status plus 30 days or if there was an earlier bankruptcy affecting what was then non-dischargable tax.

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