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When Can You Discharge Taxes in a Bankruptcy Case?

In the right circumstances, bankruptcy can be an effective means of managing and discharging your tax debt. However, determining which taxes can be discharged at a given time is not always easy. The timing of your taxes will play a big role in your ability to discharge them. The taxes you discharge can include both federal and Ohio state income taxes, so long as they meet the requirements of an income tax discharge.

Some factors you will need to consider include the following:

  • When the taxes were due
  • When the return was due
  • When you filed the return
  • When the taxes were assessed
  • Whether the debt is for penalties or interest
  • Whether you committed fraud
  • Whether the taxing authority filed a lien

woman stressing over taxes and bankruptcy
You must also meet several requirements to discharge your income taxes, including:

  • Three-year rule: The tax must have arisen from a return that was due at least three years before you filed for bankruptcy.
  • Two-year rule: The tax return must have been filed two years or more before filing for bankruptcy.
  • 240-day rule: For your taxes to be dischargeable, the taxing authority must assess that tax at least 240 days before you file for bankruptcy. In this process, the taxing authority records your liability for the tax. This usually happens on either April 15 or the date on which you file your return — whichever is later.

If your tax debts do not these three criteria or were already considered non-dischargeable in a previous bankruptcy case, you will not be able to discharge them when you file for bankruptcy protection.

To learn more about discharging income taxes in bankruptcy, consult an experienced Ohio bankruptcy lawyer with Fox & Associates Co., L.P.A.

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