If a taxpayer owes the IRS for back taxes, the IRS will either file a tax lien or a tax levy against the taxpayer in order to collect.
Before the actual collection of a tax debt commences, the IRS will mail to the taxpayer a Notice of Tax Lien in which the taxpayer must respond. Timeliness in responding is very important to resolving your case before the IRS files a tax lien or tax levy against you.
Q: Can the amount of taxes I have to pay in a particular period be dischargeable?
A: A tax obligation is dischargeable under chapter 7, 13, and 11 if all five of the following criteria are met:
- Three Year Rule: The tax year in question must be over three years old dating from the most recent date the tax return was due to be filed, either April 15 of the year following the tax year in question or October 15 of the year following the tax year in question if an extension was filed.
- Two Year Rule: The tax return must have actually been filed more than two years before the bankruptcy is filed.
- 240 Day Rule: The tax in question must have been assessed for more than 240 day prior to the filing of the bankruptcy, plus anytime period during which an offer in compromise was pending plus 30 days.
- Non Fraudulent: The tax return for the year the year in question must have been non-fraudulent.
- Non Tax Evasion: The taxpayer must not have made a willful attempt to evade or defeat the tax.
Failure to satisfy any one of these criteria makes the tax non-dischargeable in Chapter 7, 13 and 11 of the Bankruptcy code.