Can You Discharge IRS Tax Debt Through Bankruptcy in Colorado?

For many individuals struggling with overwhelming debt, tax liabilities add another layer of stress. At the Law Offices of Andrew F. McKenna, P.C., we assist the Denver public in exploring every available avenue for relief, including the potential to discharge IRS tax debt through bankruptcy. While discharging tax debt is possible, it involves strict rules and requirements.

Understanding Tax Debt and Bankruptcy

Bankruptcy provides individuals a legal method to eliminate or restructure debts under the protection of the court. However, not all debts are treated equally. Some obligations, like most recent tax debts, are categorized as "priority debts" and are generally not dischargeable. That said, under certain circumstances, older income tax debts can be discharged through a Chapter 7 or Chapter 13 bankruptcy filing.

Requirements for Discharging Tax Debt

To have IRS tax debt discharged in bankruptcy, several conditions must be satisfied:

• Three-Year Rule: The tax return must have been due at least three years before the bankruptcy filing.
• Two-Year Rule: You must have filed a legitimate tax return for the debt at least two years prior to filing for bankruptcy.
• 240-Day Rule: The IRS must have assessed the tax at least 240 days before the bankruptcy case is filed.
• Non-Fraudulent Filing: The tax return must not have been fraudulent, and there must not have been any willful attempt to evade paying taxes.

If all these criteria are met, your IRS tax debt could be eligible for discharge under Chapter 7 bankruptcy, which eliminates the debt, or Chapter 13 bankruptcy, which may allow you to repay some or all of the tax debt over a three-to-five-year plan.

What Types of Tax Debt Are Not Dischargeable?

Certain tax debts remain non-dischargeable even in bankruptcy, including:

• Payroll taxes
• Fraud penalties
• Recent tax debts (less than three years old)
• Tax liens recorded before bankruptcy (although the lien remains attached to property)

Why Legal Assistance Matters

Successfully navigating the discharge of tax debt requires a careful review of your financial and tax history. At the Law Offices of Andrew F. McKenna, P.C., we guide Denver residents through the process, ensuring compliance with bankruptcy laws and maximizing debt relief opportunities. Working with a knowledgeable attorney can significantly increase your chances of a favorable outcome.