• Home
  • About
  • Services
  • Testimonials
  • Bankruptcy FAQ
  • Blog
  • Contact
Shoemaker & Dart, p.s., Inc.
  • Home
  • About
  • Services
  • Testimonials
  • Bankruptcy FAQ
  • Blog
  • Contact

did you know?

When is tax liability no longer a liability in a bankruptcy proceeding?

5/22/2017

0 Comments

 
Picture
​For tax liability to be dischargeable in bankruptcy, i.e. no longer considered a personal liability, at least the following three rules must be met:

  1. The three year rule: the tax return for the tax year under question must have been due, including calculating all extensions, three years prior to bankruptcy;
  2. The two year rule: a legitimate, non-fraudulent tax return must have been filed at least two years prior to bankruptcy; and
  3. The 240 day rule:  the tax cannot have been assessed within 240 days of the bankruptcy. 
 
Please note that if taxes are not dischargeable in a Chapter 7 bankruptcy, a Chapter 13 bankruptcy may provide meaningful protection to a person owing tax debt.  There has been much litigation across the country in the past several years concerning discharge of tax liability in Chapter 13 cases and recent court decisions have changed the interpretation of tax claim treatment in Chapter 13 cases.  The US Supreme Court was asked to hear such a case but recently declined to do so.    
 
A successful Chapter 13 Plan can provide for repayment of secured and unsecured priority tax liability to the IRS and allow for discharge of penalties, interest on penalties, and other eligible general unsecured tax debt.  In addition, priority taxes paid through a Chapter 13 Plan will not accrue additional penalties.   

​Liability on late-filed tax returns are very likely never dischargeable without a very good reason.  However, the debt can still be managed through a Chapter 13.  Where there is non-dischargeable tax liability, the accruing interest is also non-dischargeable but a Chapter 13 plan may be able to provide to pay that interest to the IRS in some circumstances.  
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Archives

    July 2018
    May 2018
    February 2018
    January 2018
    October 2017
    September 2017
    August 2017
    July 2017
    May 2017

    Categories

    All
    Chapter 13
    Chapter 7
    Civil Penalties
    Foreclosure
    Garnishment
    HOA Dues
    IRS
    Judicial Lien
    Lien Avoidance
    Mortgage
    Repossession
    Scam
    Tax Liability
    Traffic Fines

    RSS Feed

About

Services

FAQ

Blog

Contact

Copyright © 2022. Shoemaker & Dart, P.S., Inc. All rights reserved.
  • Home
  • About
  • Services
  • Testimonials
  • Bankruptcy FAQ
  • Blog
  • Contact