By: Jeena Cho, San Francisco bankruptcy attorney

Did you know you can get rid of certain back income taxes (both Federal and State) in bankruptcy? Oftentimes, clients falsely believe they can never discharge taxes through bankruptcy. As the saying goes… “death and taxes.”

In general, taxes can be discharged in bankruptcy if it has been at least:

• Three years from due date of the return;
• Two years from actual filing of the return (Substitute for Returns do not count);
• 240 days from an assessment;
• Returns must not be fraudulent and there must be no evasion.

As you can see, timing is critical when performing the above analysis. File on the wrong date - you might get stuck with tax debt that otherwise could have been discharged had you waited. In addition to reviewing your returns, requesting a tax transcript is critical in determining the timeline.

If you have recent tax debt that we can’t discharge, Chapter 13 can be a good alternative. In Chapter 13, you can get up to 5 years to repay the portion of the income tax that is non-dischargeable.

Photo credit: alancleaver

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