Over the years I have received the same question from many different individuals: “Can Bankruptcy Discharge The IRS Taxes I owe?” The answer of this question depends on the age of the debt. Dealing with the IRS and interpreting the bankruptcy code can be burdensome and scary. It is advised that individuals who owe back taxes to the IRS consult with a knowledgeable Fort Lauderdale Bankruptcy Lawyer to discuss their rights. It is important to understand when IRS debts become dischargeable so that a case is not filed prematurely, thus ensuring insure that the IRS debt gets properly discharged.
Tax liabilities owed to governmental units are considered a priority claim of the eighth order under the United States Bankruptcy Code, Section 507(a)(8). The code, however, indicates that such liabilities only become priority if they are taxed on, or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition: (1) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition; (2) assessed within 240 days before the date of the filing of the petition.
(1) Simply put, this particular section of the bankruptcy code requires that tax liabilities owed to governmental units to be at least three (3) taxable years of age for them to become dischargeable. For example, if you file for bankruptcy (be it Chapter 7, Chapter 11, or Chapter 13) in year 2012, any tax liabilities incurred prior to tax year and including tax year of 2008 are dischargeable. If you have incurred a tax liability in year 2009 or 2010, however, that liability will not be discharged by your bankruptcy filing in year 2012.
(2) The second part of this section indicates that if you have had a tax assessment for tax year that was at least three years ago, you can only discharge any liability revealed by the assessment if you file your bankruptcy case at least 240 days after the date of the assessment. For example, if you had a tax assessment for taxable year 2008 in February 1 of 2012, any liability discovered for that taxable year will be dischargeable in bankruptcy only if you file your case 240 days after February 1, 2012 and not a day before.
Unfortunately, the IRS or any governmental tax unit had sped up their process of collecting overdue tax liabilities, making the discharge of these liabilities in bankruptcy impossible. If this scenario applies to you and you simply do not have enough to spend after the garnished amount is taken out of your wages, you may want to consider Chapter 13, where you can break the monthly payment into smaller chunks, and pay them back over the commitment period of 36 months to 60 months.
Call Kristy Qiu at (954) 282-8296, a Fort Lauderdale, Florida bankruptcy attorney if you have any questions regarding this topic.