When are tax debts dischargeable in Bankruptcy?

In certain limited situations, income taxes may be discharged through bankruptcy. If you owe state or federal income taxes, the taxes can be dischargeable if you filed your tax return and:

1. The tax return was due more than 3 years prior to the bankruptcy filing; and
2. Your income tax return was actually filed more than 2 years prior to the date you filed your bankruptcy; and
3. The income taxes were assessed by the IRS or the Massachusetts DOR more than 240 days prior to your bankruptcy filing; and
4. You did not file a fraudulent return or willfully attempt to evade paying taxes.

If one meets all of the above, then their personal income tax debt is dischargeable. Furthermore, if the tax obligation is dischargeable, the interest and penalties are also dischargeable. However, if the tax obligation is non-dischargeable, so are the related interest and penalties.