Taxes In A Chapter 7 Bankruptcy: Legal Guidance
In order for a liability due to the IRS to be considered for a bankruptcy discharge in a Chapter 7 bankruptcy, the tax liability needs to meet the following bankruptcy code requirements:
1. The liability is due a minimum of three years prior to the bankruptcy filing.
Example: The taxes filed for the year 1999 become due April 15, 2000. They are then eligible for discharge on April 16, 2003.
Note: Be aware that there can be no extension requests to file a return whether this return was completed by a representative or by the individual themselves. However, if the request for extension had been made, then the three years will be extended to the actual date the extension came due.
2 .The returns must be filed a minimum of two years prior to the filing for bankruptcy.
A. A return needed to have been actually filed.
B. If the IRS had filed a Substitute for Return (SFR) that return will not qualify for having filed a return for bankruptcy purposes. The taxpayer is the one who actually has to file a return.
3. The liability assessment must be made a minimum of 240 days before filing. The return cannot be fraudulent.