To be able to discharge a tax debt, the tax needs to be older than 3 years, correct? I think this what normally people including myself normally remember about discharging taxes. Let’s see on a recent case:
4.8.11 client filed bankruptcy hoping to discharge 2007 income tax. Correct or not? Well, there are full three years between end of 2007 and filing, is the debt discharged?
No, the attorney messed up. If you want to discharge income taxes from 2007 you calculate from the DUE DATE of the tax return, this is 4.15.08! (Watch out for extensions.) That means the earliest day to file would have been 4.15.11. The attorney filed 7 days too early. This is the 3-year-Rule. 11 U.S.C. 507(a)(8)(A)(i)
What is the 2-year-rule then? The taxes actually must have been filed 2 years before filing. 11 U.S.C. § 523(a)(1)(B)
What is the 240 days rule? The tax must have been assessed more than 240 days ago. Remember 3 years from due date, taxes filed more than 2 years ago.
by Tobias Licker