Are taxes owed to governmental authorities dischargeable in bankruptcy?
A.) In a Chapter 7 bankruptcy income tax obligations are dischargeable if the tax return for the year in question was filed and: (1) The 3 Year Rule: The tax return was due more than 3 years prior to the bankruptcy filing. If the debtor obtained an extension, the due date would be the extension deadline (2) The 2 Year Rule: For a late filed return (filed after its due date and any extensions), if the delinquent return was actually filed more than 2 years prior to the bankruptcy filing (3) The 240 Day Rule: If there has been an assessment by a taxing authority, it was made more than 240 days prior to the bankruptcy filing (4) The debtor did not file a fraudulent return or willfully attempt to evade paying taxes. Example #1 – Debtor timely filed their 1997 tax return (due on April 15, 1998). There have been no recent assessments by the government and the return was not fraudulent. The taxes still owed from the 1997 return are dischargeable if the bankruptcy is filed after April 15, 2001
