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Tax News
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CAN
TAXES BE DISCHARGED IN BANKRUPTCY
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A taxpayer who owes federal and/or state taxes may, in some instances,
obtain a discharge of these obligations in bankruptcy. Dischargeability
depends on a number of factors, including the nature of the tax owed, when
the tax was assessed, and if and when a return was filed. Bankruptcy Code
Section 523 governs the dischargeability of taxes. Pursuant to Bankruptcy
Code Section 523(a)(1), a debtor may not discharge a debt for any of the
particular types of taxes specified in Bankruptcy Code Section 507(a)(2)
or 507(a)(8) if, with respect to the tax, he filed a required return late
or not at all, or filed a fraudulent return in an attempt to evade the
tax.
Bankruptcy Code Section 523(a)(1) creates three separate categories of
income tax liabilities that are not dischargeable:
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(1) administrative priority tax claims;
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(2) tax liabilities attributable to unfiled returns and certain
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delinquent returns;
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(3) tax liabilities attributable to fraudulent or willful attempts to
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evade or defeat tax.
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Tax liabilities are not dischargeable if they do not fall into one
of these non-dischargeable categories. In some
cases, the taxpayer can defer filing bankruptcy and include an additional year
of taxes in your bankruptcy.
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