Legal Question in Bankruptcy in Maryland

Re: Taxes

You filed too soon. Income taxes are non-dischargeable for at least 3 years from the due date of the return (provided other conditions are met). 2000 taxes were due 4/15/01, so became dischargeable no sooner than 4/15/04, provided you had no extensions.

Re: Taxes

In order to determine when the taxes were assessed, you must get a "tax transcript" from Internal Revenue Service and from the State of Maryland. That is because dischargeability of taxes is determined from the date of assessment. Usually (but not always) that is the latest due date for the tax return.

Even if your taxes have not been discharged, you may be able to work out a satisfactory offer in compromise if there is a genuine hardship preventing immediate payment in full of the taxes. You should consult an attorney before taking further action.

Re: Taxes

You got two answers to your question earlier this month. While both were correct, let's set out the rules in a little more detail.

The fact that your discharge was entered so soon after your petition was filed indicates that you filed under Chapter 7. In Chapter 7 taxes must meet three rules to be dischargeable (see BC 507(a)(1) and 523(a)): 3 years from the due date; 2 years from the date filed; and 240 days from the date assessed. Mr. Press told you correctly that your 2000 and 2001 taxes were not discharged because your petition was filed less than 3 years from the respective due dates of the returns. There could be other reasons as well if, for example, you did not file on time (the 2-year rule), or if the IRS and/or Maryland assessed taxes later due to an audit (the 240-day rule). Thus, when an IRS representative told you that the problem was the assessment date, he or she was referring to the wrong rule, although the net result is the same -- the taxes properly survived your Chapter 7 discharge.

If these remaining tax liabilities are beyond your ability to pay, you may be able to file a Chapter 13 once the relevant dates have passed, including the additional time that is tacked on because of your prior bankruptcy (see U.S. v. Young). This option will no longer be available 180 days after enactment of the pending bankruptcy "reform" legislation (which should more properly be called the Bankruptcy Destruction Act of 2005). So if this is something you need to consider, you should do so without delay.