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Many Taxes Can Be
“Discharged” Through Bankruptcy

Did you know that some income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Federal Bankruptcy Code? Most taxpayers, and some attorneys too, are often under the mistaken assumption that tax liabilities are not dischargeable in a federal bankruptcy filing.

In fact, income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Federal Bankruptcy Code. As a generally rule, older federal income tax debts are dischargeable in bankruptcy. These older tax debts would have to be tax debts that are more than 3-years old, for which the corresponding tax return was filed more than 2-years ago, and the taxes were assessed more than 240-days prior to filing the bankruptcy petition.  In addition to being able to discharge some older federal income tax debts in bankruptcy, filing a bankruptcy petition can often be helpful as it halts most of the State’s or IRS’s collections activities.

Five General Rules to Discharge Tax Debt Through Bankruptcy

If the income tax debt meets all five of these general rules, then the tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions.

  1. The due date for filing a tax return is at least 3-years ago.
  2. The tax return was filed at least 2-years ago.
  3. The tax assessment is at least 240-days old.
  4. The tax return was not fraudulent.
  5. The taxpayer is not guilty of tax evasion.

The federal bankruptcy tax laws are constantly changing, so it is always helpful to have an experienced tax attorney by your side who can access your overall situation and can help you determine if bankruptcy is a viable option for resolving your tax debt problem.  Fortunately, Orange County Law Attorney Paul W. Raymond is an affordable asset to help you access your situation and come to a determination. There may be many missed opportunities besides bankruptcy – sometimes that might even mean negotiating past tax dept away thus avoiding an unnecessary bankruptcy filing.  Tax Attorney Paul W. Raymond has an in-depth knowledge of business, tax and bankruptcy laws and can help guide you to a solution that makes sense.

Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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Member CA Bar Member Orange County Bar US Tax Court Attorney