Other taxes, such as fraud penalties or payroll taxes, cannot be eliminated through bankruptcy. If you've filed your returns and haven't committed fraud, bankruptcy can end back taxes from more than 3 years ago. If used in combination with one of the above strategies, it can delay the IRS for a year or two until taxes are settled. The tax debt can be canceled by requesting protection using any of the options available under the federal bankruptcy code.
These include chapters 7 and 13 for most people, chapter 12 for family farms and fishing operations, and chapter 11, which deals mainly with businesses and larger debts. Evading payment of taxes was enforceable because the debtor recognized responsibility but simply couldn't pay. While an unsecured debt consolidation loan would generally qualify for bankruptcy, if you used a portion of that loan to pay a non-refundable tax debt, that part of the loan would not qualify for forgiveness. You can still file for bankruptcy and pay off your other debts, but you'll still owe those taxes and must pay them.
The rules for when the tax debt qualifies for forgiveness and when it cannot be complex, especially with regard to the last factor in which the debt was evaluated. Priority tax debts include recent property taxes, taxes you must collect or withhold (such as those from FICA or Medicare), employment taxes, special taxes, and non-punitive tax sanctions. It's not that easy to defeat the IRS because the Bankruptcy Code significantly limits a debtor's ability to pay taxes in the event of bankruptcy. The court concluded that the debtor had voluntarily and deliberately violated these obligations and stated that the tax liability was not enforceable.
Income taxes when more than three years have passed since the return was filed or when more than 240 days have passed since the taxes were assessed. Under Chapter 13 of the Bankruptcy Code, only certain exceptions to forgiveness apply to a Chapter 13 case, provided that the debtor makes all payments in the case of Chapter 13 and that the debtor makes all payments under the Chapter 13 plan. Recent property taxes, trust fund taxes, sales taxes, certain employment taxes, and non-punitive tax penalties less than three years before the return is filed are not refundable. However, to obtain forgiveness of unsecured debts, no at the end of your Chapter 13 plan, you must file all required tax returns for tax periods within four years of filing them, and you must continue to file all required returns and pay taxes as they expire for the three-five years after your bankruptcy as Chapter 13 is in progress.
If you filed after the extension date, the return may not be considered valid and the tax debt may not be settled. This means that you can pay your priority tax debts at an interest rate of 0%, which is usually more favorable than agreements you can close directly with the IRS. There was also a debtor who tried to argue that attempts to hide assets were not attempts to evade or void taxes so that taxes would not be enforceable. I had heard of a group of tax protesters and had attended their meetings to find out how not to pay taxes.
