The short answer? A bankruptcy attorney is not a tax attorney.
The long answer? Bankruptcy cannot always discharge IRS taxes. There are specific rules to qualify for such a discharge. Most bankruptcy attorneys either don’t understand the rules or just don’t want to deal with them.
That is why you need to engage a tax attorney as well as a bankruptcy attorney if you are dealing with IRS taxes.
What Are the Rules for Discharging IRS Taxes in Bankruptcy?
Here is an outline of the rules of discharging IRS taxes in bankruptcy. These are just outlines, and there are tons of details that you will need to talk about with an attorney.
- The taxes must be from income. They cannot be payroll taxes or fraud penalties. You can not remove those by filing for bankruptcy.
- You cannot have filed with intent to commit fraud. If you used a false Social Security number, or used other fraudulent means, to avoid paying taxes, you don’t qualify for bankruptcy discharge of taxes.
- The tax debt must be at least three years old. The tax debt must have been due at least three years before the date of filing to qualify for bankruptcy discharge.
- All tax returns must have been filed at least two years prior. You may owe tax debt from three years ago. But, if you didn’t file the tax return from those overdue taxes until last year, the tax debt does not qualify for bankruptcy discharge.
- The IRS must have assessed the tax debt at least 240 days before bankruptcy filing or not assessed it at all. If the debt is not assessed, you are good to go. If it has been assessed, you must wait 240 days.
The bankruptcy filing will not clear tax liens.