Many people assume tax debt always survives bankruptcy. Not always. The Bankruptcy Code sets timing rules that decide whether an income tax debt is a priority claim and whether it can be discharged.
The timing rules
Under 11 U.S.C. 507(a)(8), priority status generally covers income taxes for which a return was last due, including extensions, within three years before the petition, and taxes assessed within 240 days before the petition, with adjustments. Under 11 U.S.C. 523(a)(1)(B), taxes for which a required return was not filed, or was filed late and within two years before the petition, are not discharged.
Fraud and evasion
Under 11 U.S.C. 523(a)(1)(C), a tax is not discharged if the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat it. That language tracks the evasion statute. See section 7201.
Compare the options
Bankruptcy is one tool. An offer or payment plan may be a better fit.
General information only, not legal advice. Reading this page does not create an attorney-client relationship. Laws and IRS procedures change; the sources cited were reviewed on the date shown above.