Discharging Taxes in Bankruptcy

If you cannot pay your tax debt in full when due, bankruptcy can provide relief. Owing taxes to the Internal Revenue Service (IRS) or the Kansas Department of Revenue can result in aggressive collection measures, including tax liens on your real estate and personal property; levy of wages, bank accounts, Social Security benefits, and retirement income; and offset of future tax refunds. Bankruptcy will put these collection measures on hold and may even discharge your obligation to pay the tax debt altogether.

To be dischargeable in bankruptcy, individual income tax liabilities must meet the following requirements on the date of the bankruptcy filing:

  1. More than three years has passed since the tax return was last due, including extensions.
  2. If the tax return was filed after the due date, more than two years has passed since the return was filed.
  3. More than 240 days has passed since the tax was assessed.

Certain acts, such as a prior bankruptcy case, an offer in compromise, a tax appeal, or a stay of collection, can extend these time frames.

If your tax debt is not eligible for discharge, a Chapter 13 Plan can provide for reasonable repayment terms where you make monthly payments over a three to five-year period. Contact one of our experienced attorneys for a Free Consultation to determine if bankruptcy can provide the relief you need.