Income Taxes

Are income taxes dischargeable?

The following income taxes are priority claims and are not dischargeable:

Income taxes where the returns were due within three years of the bankruptcy.

Income taxes that were assessed within 240 days before the bankruptcy.

Personal property and real estate taxes last payable without penalty within one year of the bankruptcy.

Sales taxes withheld by a retail merchant and not remitted to the taxing authority.

Employee payroll taxes withheld from and employee's pay and not remitted to the taxing authority.

If you file Chapter 13, your plan must provide for payment in full of these taxes. Penalties assessed on the taxes are not priority claims however, and can be reduced substantially. Once you have filed a bankruptcy case, tax debts do not continue to accrue interest.

In a Chapter 7, income taxes where the returns have not been on file with the taxing authority for at least two years before the bankruptcy are also non-dischargeable.

Discharging taxes in bankruptcy is a very complicated area of the law and should not be attempted without the assistance of a qualified bankruptcy attorney.

For more information about bankruptcy, please call us at 408-294-6100, or e-mail us via info@sjconsumerlaw.com. One of our attorneys will be able to answer any questions which you may have in greater detail. Please remember that the foregoing information is of a general nature, and does not constitute legal advice. The facts of each situation are unique, and we must discuss those facts with you before any advice can be given.

Revised
March 03, 2005