Certain tax debts can be discharged in bankruptcy if they meet specific timing rules. Here is what Houston residents need to know.
Some tax debt can be discharged if it meets the 3-2-240 rules: return due 3+ years ago, filed 2+ years ago, assessed 240+ days ago. Texas has no state income tax, so only federal taxes apply.
Federal income tax debt may be dischargeable if ALL three timing conditions are met:
Warning: Extensions, amended returns, audits, and prior offers in compromise can toll (pause) these time periods. Get professional analysis before relying on these rules.
Texas has no state income tax, so tax debt in Houston bankruptcy cases involves only federal IRS obligations and local property taxes. The three-year, two-year, and 240-day rules for discharging federal income tax debt apply in the S.D. Tex. just as in all federal districts.
Some tax debt can be discharged if it meets the 3-2-240 rules: return due 3+ years ago, filed 2+ years ago, assessed 240+ days ago. Texas has no state income tax, so only federal taxes apply.
Payroll taxes, taxes with no return filed, fraudulent returns, and taxes assessed within 240 days generally cannot be discharged. Tax liens survive bankruptcy.
Three timing rules: (1) return due 3+ years before filing, (2) return filed 2+ years before filing, (3) tax assessed 240+ days before filing. All three must be met.
Yes. Chapter 13 lets you pay non-dischargeable tax debt over 3-5 years without penalties or additional interest. The automatic stay stops all IRS collection.
Yes. The IRS can levy wages without a court judgment. Bankruptcy stops IRS levies immediately. Texas has no state income tax, so tax debt in Houston bankruptcy cases involves only federal IRS obligations and local property taxes. The three-year, two-year, and 240-day rules for discharging federal income tax debt apply in the S.D. Tex. just as in all federal districts.
It depends on your total debt. An OIC settles tax debt for less but takes 12+ months. Bankruptcy may be faster and addresses other debts simultaneously.
Use the free 1328(f) screener to check whether a prior discharge affects your eligibility for a new bankruptcy discharge.
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