Many people considering bankruptcy protection wonder about whether tax debt can be discharged as part of a bankruptcy filing. The answer is complicated: in some cases, income taxes cannot be discharged and in some cases, they can.

If you owe back-taxes and have questions about your personal situation, you may want to speak with a bankruptcy lawyer. In the mean time, here’s an outline of the main issues involved in discharging income tax debt in bankruptcy.

Considerations for Discharging Income Tax Debt in Bankruptcy

Six major factors come into play in cases of income tax and bankruptcy. In order to be dischargeable, a tax debt must meet all criteria outlined.

• Three-Year Rule: First of all, income tax debts cannot be discharged unless they were due at least three years before the bankruptcy case is filed. The three-year limit doesn’t guarantee that a tax debt can be discharged, but that’s the minimum hurdle. So the most recent tax debts a person could discharge in a 2011 bankruptcy would be those due on tax day in 2008.
• Two-Year Rule: In addition to the age of the tax debt, there’s a filing age. In order to be eligible for discharge, an income tax return must have been filed at least two years prior to the bankruptcy case. This means that if you didn’t file income tax returns until after they were originally due, you may need to start counting from the date the return was filed.
• 240-Day Rule: Another criteria that income taxes must meet in order to be eligible for bankruptcy discharge is that the government must have assessed the tax at least 240 days before the bankruptcy filing. This may seem like a silly rule, given the previous two, but it becomes important in cases of governmental audits: in some cases, taxes might be reassessed years after their original due date. Keep in mind, too, that this rule applies to both federal and state income taxes, which are often assessed separately.
• Extensions: Think of the above rules as a sort of baseline for tax discharge. Various actions and circumstances (including previous bankruptcy filings, tax compromises with the IRS and more) could extend the waiting period for having a tax debt discharged in bankruptcy.
• Tax Evasion: Purposefully evading taxes or filing fraudulent returns will more or less make you ineligible to have tax debts discharged in bankruptcy.
• Tax Liens: This is perhaps the toughest rule of all. Even those income tax debts that are dischargeable may not leave a bankruptcy filer totally off the hook. In some cases, after a tax debt is discharged, the government will maintain a lien on the filer’s property, meaning that the government could take collection action against that property at some point in the future.

If you’d like to get advice on your situation or a professional opinion about whether your tax debts are likely to be discharged in bankruptcy, you may speak with a bankruptcy attorney near you.