Oklahoma Bankruptcy Law And Taxes-Discharging taxes in chapter 7 Bankruptcy

by Meagan Kania on January 24, 2012

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Chapter 7 Bankruptcy: Can you discharge Tax Debt?

On any Chapter 7 Bankruptcy consultations, the prospective Debtor is always advised of a general caveat that certain debts classified as priority debts are not dischargeable including domestic support obligations such as child support and taxes due to the government and in most instances they are in fact not dischargeable.

However the bankruptcy code in fact does allow federal income tax debt in strict conditions to be dischargeable:

First the tax debt you intend on discharging must be income taxes, because any other tax debt such as payroll taxes or penalties on fraudulent activity is barred from being discharged.  Accordingly, you must not have committed fraud or willfully evaded paying taxes by using false Social Security numbers on your returns as governed by §523 (a)(1)(C), which specifically outlines the foregoing activities to deem the tax debt to be not dischargeable.

Second, you must have filed a tax return for the tax debt you are attempting to discharge within at lease two (2) years before filing for bankruptcy.

Third, the tax returns for the debt sought to be discharged must have originally been due at least three (3) years prior to filing for bankruptcy.

Finally the income tax debt that meets the above criteria must have been assessed by the IRS at least 240 days prior to your filing of your bankruptcy petition or must not have been assessed yet. *

*This time limit is subject to extension if the IRS had suspended collection activity because of an offer in compromise or a previous bankruptcy filing)

For a free confidential bankruptcy consultation please call our Oklahoma Bankruptcy Attorneys at 918-637-1546

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