Posted on May 25, 2009 at 5:30 pm I often come to DestroyDebt.Com to provide my insight on matters relating to credit card debt as I worked in the credit counseling industry for several years. However someone posted this question a while back and I never saw a response and am still curious if filing bankruptcy can wipe out tax debt. If anyone knows let me know!!

Posted on May 25, 2009 at 5:47 pm  In order to discharge back taxes in a Chapter 7 Bankruptcy, the follow stipulations must all be met: 1) The tax debt must be 3 years old. In other words, the date that the taxes in question were due must be at least 3 years prior to the bankruptcy filing. 2) The back taxes are income taxes. 3) The tax return filed in question was not done so fraudulenty. 4) The tax return in question was filed at least 2 years prior to the date of the bankruptcy filing. 5) The tax debt in question was assessed by the IRS at least 240 days prior to the date of the bankruptcy filing. This is referred to as the "240 Day Rule."

Posted on May 25, 2009 at 11:51 pm In other words, it's very difficult to eliminate your taxes in bankruptcy.

Posted on June 1, 2009 at 2:38 pm People with back taxes should try and set up an Installment Agreement with the IRS t pay off their tax debt, or submit an Offer in Compromise to the IRS to settle their tax debt. Installment Agreements are basically payment plans that allow the taxpayer to pay off back taxes over a 3-5 year period. The tax debt must be paid back in full, unless the agreement is a Partial Payment Installment Agreement. Settling tax debt is also an option. The nice thing about settling with the IRS is that the average settlement is in the 15% range. However, if you cannot prove (with financial documents etc.) as to why you need such a settlement and why you will not be able to pay off the tax debt in full at any point in the future, don't bother submitting an offer. The IRS extends settlements to less than 15% of the people who submit them, so you better have a good reason as to why.