To be dischargeable, individual income tax liabilities must meet the following “mechanical” rules of 11 USC §523:
(a) A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt—
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507 (a)(3) or 507 (a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, or equivalent report or notice, if required—
(i) was not filed or given; or
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
What this means is that in order for a tax to be eligible for discharge, it must be over three years old. This date is usually determined by when the tax became due. For example, 2009 Federal Income Taxes did not become due until 2010, therefore they would not be over three years old until 2013. Additionally, the tax return not only needs to have been filed with the government, but filed at least 2 years before the bankruptcy was filed. For example, if a 2006 tax return was filed in 2009, and then a Bankruptcy was filed in 2010, the tax would not be eligible for discharge, but if the bankruptcy were filed in 2012, it would be beyond the 2 years and the tax would be eligible for discharge. The third part of the test is that the tax must have been assessed more than 240 days prior to the bankruptcy filing. This means that if a 2006 return, filed in 2006, is audited in 2013, a bankruptcy filing would have to come more than 240 days after the new assessment as a result of the audit.
If that wasn't enough, filing fraudulent returns or willful attempts to evade or defeat a tax can also prevent such taxes from being discharged (11 USC § 523(a)(1)(C)). Some other types of taxes, including, but not limited to, withheld payroll taxes, the trust fund penalty under IRC § 6672, most state sales taxes and certain excise taxes, are never dischargeable. Such nondischargeable taxes may also be priority debts under 11 USC § 507(a)(8).
If you are burdened by tax debt and want to know if a bankruptcy could help, contact a local bankruptcy attorney. This is just a brief overview of some of the potential issues that tax debt can cause. Many bankruptcy attorneys offer free consultations, and they will be better situated to look at your precise situation and let you know whether your taxes can be discharged in bankruptcy.