In some limited cases, delinquent taxes can be discharged through a bankruptcy. There are two basic types of bankruptcy available: Chapter 7 and Chapter 13. There are very specific and complex rules in regards to discharging delinquent tax debt through a bankruptcy. At minimum, the following criteria must be met:
- Tax returns were filed more than two years prior to the bankruptcy filing.
- The tax liability was assessed more than 240 days prior to filing of the bankruptcy petition.
- The liability is not due on Trust Fund Tax.
- The taxpayer did not attempt to evade or defeat the tax, nor was the tax liability due to a fraudulent tax return.
- The tax was not assessable at the time of the filing of the bankruptcy petition.
- The tax was unsecured.
- It has been more than 3 years since the returns were last DUE to be filed (including extensions).
- The returns were timely filed or it has been at least 2 years since the returns were filed.