A lot of my clients find themselves owing back taxes to the IRS. And when I tell my clients that they might be able to discharge their tax debt if they file for chapter 7 bankruptcy, they almost always look at me like I am crazy. But it is true. In some cases, you can discharge your tax liability.

When you file for chapter 7 bankruptcy, you can discharge your past due taxes if:

• you filed a tax return for the year/years that you owe back taxes;
• your back taxes are for a tax return filed at least two years before you file for bankruptcy;
• your tax return for the back taxes was initially due at least three years before you file for bankruptcy;
• the IRS has not assessed your liability for your back taxes within 240 days before you file for bankruptcy; and
• You did not willfully evade paying your income tax.

Without a doubt, there are a lot of hoops to jump through and a lot of requirements. But if you owe a substantial amount to the IRS, and if you qualify to discharge your debt, it is worth looking into. There are, however, several pitfalls that you need to be aware of.

You have to be aware of the time periods surrounding your income tax debt. For example, do not file for bankruptcy one month before you reach the two year mark for filing your return. Also, you must have accurate information about your tax situation before you file. Do not assume anything. Contact the IRS and get a free tax transcript. That way, you have an accurate timeline to work with.

Finally, you have to know if the IRS placed a lien on something you own. If the IRS has placed a lien on your property, that is a major obstacle. By filing for chapter 7, the IRS cannot garnish your wages or hold you personally liable for our discharged taxes. But the lien will remain on your property. And that can cause all kinds of problems.

If you owe the IRS past due taxes, talk to a bankruptcy attorney or IRS tax attorney to see if filing for chapter 7 bankrutpcy can help. A skilled bankruptcy attorney will be able to guide you through the process and help you determine the best path for you to take.

Jacob McElwee Topeka Bankruptcy Attorney