Discharging Income Taxes in Bankruptcy
Generally, most people who file bankruptcy will not receive a discharge of their income taxes. Therefore, they will still have to pay the taxes even after the bankruptcy is complete. However, it is possible for some people to discharge income taxes in bankruptcy. The first issue is whether the income tax return was due more than three years ago. For example, the 2003 tax return was due April 15, 2004 which was more than three years ago. Since it was due more than three years ago, the 2003 income taxes may be dischargeable.
The 2003 income taxes will not be dischargeable if they were not filed timely. For example, if they were filed in 2007 instead of when they were due in 2004, then they will not be discharged in the bankruptcy. A person who owes non-dischargeable income taxes can still use a Chapter 13 bankruptcy to set up an affordable payment plan to pay the delinquent taxes. Another option is to wait until enough time has passed for the taxes to become dischargeable before filing bankruptcy.