If I file bankruptcy will the taxes I owe the IRS and the Georgia Department of Revenue be discharged?
Depending on the type of taxes that you owe and how old the taxes are, you might be able to discharge taxes owed to the IRS or the Georgia Department of Revenue in your bankruptcy case. This is a complex area of law that is very fact sensitive, but here are a few of the rules that apply to the discharge of taxes in bankruptcy.
The Three Year Rule
The taxes you owe to the IRS or the Georgia Department of Revenue have to be more than three years past due plus any extension that you were given to file your return. For example, if you filed your 2010 income tax return by April 15, 2011, then the three years will run on April 15, 2014. But if you asked for an extension to file those returns and didn’t actually file your tax return until October 15, 2011, then the three years doesn’t run until October 15, 2014.
Late Filed Returns – The Two Year Rule
If you didn’t file your tax return on time, didn’t get an extension, and waited several years before filing the return, then the two year rule also applies. For example, if you didn’t file your 2007 tax returns until April 15, 2012 then you will have to wait until after April 15, 2014 to discharge these taxes in your bankruptcy case. Although the due date for 2007 tax returns was April 15, 2008 and therefore the taxes are more than three years past due, the fact that the return wasn’t filed on time adds two years on to the length of time you’ll have to wait for the taxes to be dischargeable in your bankruptcy case.
The 240 Day Rule and Tolling Plus 90 Day Rule
If the IRS or the Georgia Department of Revenue has issued a Notice of Assessment of Taxes against you for past due taxes, that assessment has to be more than 240 days old in order for the taxes to be dischargeable in your bankruptcy case. Additionally, if the collection of these taxes was tolled for any reason such as you requested the IRS to consider an Offer In Compromise, then the period of time that collection of the taxes was tolled plus ninety days is added to the length of time the taxes are non-dischargeable.
Return Not Filed or Filed Fraudulently = No Discharge
If you failed to file a tax return or you filed a fraudulent tax return then you can not get a discharge of taxes owed to the IRS or the Georgia Department of Revenue.
No Discharge for Certain Types of Tax Debt
There are certain types of debt that cannot be discharged, including trust fund taxes (sales taxes, taxes withheld from employee’s wages, etc.), excise taxes that are less than three years past due, and other specific types of taxes.
The Chapter 13 Option
Even if the taxes you owe are not dischargeable in a Chapter 7 case, you might be eligible for a Chapter 13 plan that will stop the IRS from levying your wages and bank accounts, stop interest and penalties from being added to the amount of taxes that you owe, and provide for the discharge of the taxes upon successful completion of your plan. An experienced bankruptcy attorney will be able to advise you as to whether a Chapter 7 or a Chapter 13 is the best way to handle your past due tax debt.
Free Consultation with Experienced Bankruptcy Attorneys
Discharge of taxes in bankruptcy is a complex area of law and individuals that owe taxes to the IRS or the Georgia Department of Revenue are strongly urged to consult with experienced bankruptcy counsel. The attorneys at The Ballard Law Group have extensive experience in this type of situation and we offer a free initial consultation so that you can discuss the specifics of your case. Call us today at (404) 800-9939 to schedule your free initial consultation at either our Atlanta or Lawrenceville office.