Many people are under the impression that you can never discharge taxes, penalties or interest when you file for a Chapter 7, 11 or 13 bankruptcy. The truth of the matter is, that while it can be a complex process, it is possible to discharge some of these tax debts if they fit within certain rules.
Specifically, you can discharge these tax debts if they fall under the 3-year, 2-year and 240-day rules, also known as 3-2-240 rules. The short explanation is that you can discharge income taxes that were due three years before you filed bankruptcy, as long as it has been at least two years since you filed the tax forms, and it has been 240 days since the taxes were assessed. You must meet the requirements of all three rules to discharge your taxes.
The 3-Year Rule – This rule states that if you want to discharge your income taxes, they must become due at least three years before you file for bankruptcy. For example, if your taxes are due on April 15, then you must add three years to that date to give you the earliest date you can file for bankruptcy and still be able to discharge those taxes.
The 2-Year Rule – This rule states that your income taxes must have been filed at least two years before you can file for bankruptcy.
The 240-Day Rule – This rule states that taxes must have been assessed to you at least 240 days before you can file for bankruptcy.
This is a simplified version of an explanation of the 3-2-240 Rule. It’s best to check with a tax attorney who can assist you with the details to make sure you are in compliance with all three rules so that you can discharge income taxes with certainty. In cases where liens have been filed, you should also check with a tax attorney to fully understand the implications of a lien.
Faletti Law Office focuses on family law, tax law, bankruptcy and estate planning for clients in Bloomfield and the surrounding Colorado communities of Arvada, Westminster, Northglenn, Commerce City, Erie, Brighton, Lafayette, Longmont, Firestone, Thornton, Adams County, Jefferson County and beyond.