An important timing plan involves taxes. A lot of people think taxes in bankruptcy are just non dischargeable but that’s just not true. If all the three major timing elements are present in your bankruptcy case for the taxes in question, they can be discharged in the bankruptcy.

The three major timing elements and I’ve talked about this in other videos, all right, it’s for a tax year that’s at least 3 years before the year that you file bankruptcy, you filed the returns for that year at least 2 years before the bankruptcy and the taxes were assessed at least 240 days before the bankruptcy. Most of the time, we’re looking at that 3 year rule.

Let’s say you have a $10,000.00 tax bill for a tax year that’s about 2 years ago. Well, it might pay for you to work out an installment plan with the IRS and put off filing your bankruptcy for 9 months or even a year before the taxes for that year become dischargeable. That way, it’s going to save you $10,000.00. The taxes that would survive bankruptcy will all of a sudden past a certain specific date become dischargeable and won’t survive bankruptcy. It’s an important planning consideration.

When clients come to see me and they’ve got a tax debt, that’s one of the questions we always ask, what’s the tax year for which you are concerned and did you ask for an extension for your taxes. Those are both important questions that need to be answered before I can tell you if the taxes are going to be dischargeable in your bankruptcy, so once again, it does pay to have all your facts in hand before you make the decision whether to file bankruptcy.