Some older personal income tax debt may be discharged in Chapter 7 or treated as general unsecured debt in Chapter 13. The result depends on several dates, and all of the applicable timing requirements must be satisfied.
The Three-Year Rule
The tax return was generally due, including any extension, more than three years before the bankruptcy filing date. The filing deadline is not always April 15, so the actual due date for the return must be confirmed.
The Two-Year Rule
The required tax return must generally have been filed more than two years before the bankruptcy filing date. Late-filed and substitute returns can create additional issues, so the filing history should be reviewed carefully.
The 240-Day Rule
The tax generally must have been assessed by the taxing authority more than 240 days before the bankruptcy filing. The assessment date is different from the date the return was filed or the date the tax became due.
Events Can Extend the Waiting Periods
A prior bankruptcy, an offer in compromise, an extension to file, or certain collection and assessment proceedings can extend or suspend one or more of these time periods. Counting from the tax year alone is not enough.
Verify the Dates Before Filing
You should obtain and review the relevant tax transcripts so the return due date, actual filing date, and assessment date can be confirmed. Filing even a few days too early may change whether a tax debt can be discharged.
This is a simplified explanation of the principal timing rules, not a complete determination of whether a particular tax debt qualifies. Please call us at 770-683-3303 to review your tax years and filing history before deciding when to file bankruptcy.
