The Short Answer
Yes, you can discharge certain tax debts in Chapter 7 bankruptcy. But only if the tax meets specific timing requirements. Get the timing wrong and the tax survives the bankruptcy. Get it right and the debt is eliminated just like credit card debt.
The Five Rules
To discharge income tax debt in Chapter 7, all five of these conditions must be met. The tax return was due more than three years before you filed bankruptcy. The tax return was actually filed more than two years before you filed bankruptcy. The tax was assessed more than 240 days before you filed bankruptcy. The return was not fraudulent. You did not willfully attempt to evade the tax.
These timing rules are specific to the day. If you miss by one day on any of them, the tax is not dischargeable. A tax attorney calculates these dates precisely before recommending bankruptcy as a strategy.
What Bankruptcy Cannot Discharge
Trust fund payroll taxes are never dischargeable in bankruptcy. Taxes where the IRS filed a substitute for return and you never filed your own return may not be dischargeable depending on the jurisdiction. Taxes where you committed fraud or willful evasion are not dischargeable.
Chapter 13 vs Chapter 7
Chapter 13 does not discharge tax debt the same way. Priority tax claims must be paid in full through the Chapter 13 plan. But Chapter 13 can still help by stopping IRS collection activity, stripping tax liens from property, and providing structured repayment without penalties and interest accruing.
Strategic Timing
Sometimes the right strategy is to wait. If you have tax debts that are close to meeting the discharge requirements, waiting a few months before filing bankruptcy can make the difference between eliminating the debt and being stuck with it. A tax attorney coordinates with a bankruptcy attorney to get the timing right.