"bankruptcy is not always the best way to get rid of federal tax debt. given enough time, the tax may just go away. the IRS is given 10 years from the date the tax is assessed to collect in most cases by 26 USC §6502, a section of the Internal Revenue Code. the date after which the tax can no longer be collected is called the “Collection Statute Expiration Date” or “CSED” for short in IRS lingo.

however, there are many things that can give the IRS more time to collect the tax. under most circumstances, when the IRS collection officers are prevented from taking action to collect an overdue tax, the collection time is extended by the amount of time they can’t collect plus some extra time to restart their collection work.

federal law prevents the IRS from using its powers to forcibly collect unpaid tax when an Offer in Compromise is pending and for an additional 30 days after the offer has been rejected if it was unsuccessful. likewise, if a taxpayer has appealed a decision by the IRS to collect the tax by levy or seizure, the time that is taken to review the appeal, plus 30 days is added to the collection period and the CSED is extended. both of these extension rules are contained in 26 USC §6331.

additional provisions for extending the collection period are contained in 26 USC §6503. this section of the Internal Revenue Code provides for extension when the assets of a taxpayer are in the custody or under the control of any court, and for 6 months after they are released. the collection period also is extended for the period of time when a taxpayer is outside of the United States continuously for six months or more.

one common way the IRS collection period is extended and the CSED is delayed is by the filing of a bankruptcy court proceeding. because federal law prohibits collection of a pre-bankruptcy tax while the case is being processed, 26 USC §6503(h) allows the IRS tax collectors additional time equal to the amount of time the case was open plus an additional 6 months for collection after the case is closed or the stay is released.

unless it has a secured claim, the IRS is no longer able to collect tax after bankruptcy if the tax was discharged.

these are some of the reasons the taxes should have been discharged:

so many people are under the impression that you can’t wipe out IRS debt in bankruptcy. the good news is YES, you can wipe out not only IRS debt, but state tax debt, as well. BUT the tax debt must meet certain criteria. mostly, for the sake of this post discussion, we are talking about income taxes, but some other kinds of taxes may be dischargeable as well. the requirements for discharging income tax in bankruptcy are as follows:

1. the most recent due date of the return is more than three years prior to the filing of the bankruptcy petition [the "Three-year Rule" 11 U.S.C. � 507(a)(8)(A)(i)];

2. the tax return was filed at least more than two years before the filing of the bankruptcy petition [the "Two-year Rule" 11 U.S.C. � 523(a)(1)(B)];

3. the tax was assessed more the 240 days prior to the filing of the bankruptcy petition (the “240-Day Rule” � 507(a)(8)(A)(ii));

4. the tax return was non-fraudulent [� 523(a)(1)(C)];

5. the taxpayer is not guilty of a willful attempt to evade or defeat the tax.

if you owe the IRS a significant amount of money for income tax, regardless of whether your taxes meet these requirements, you should get with a bankruptcy attorney who is familiar with the dischargeability requirements for taxes to plan how to eliminate the most tax debt that you can. he/she should have advised that may not be able to file a bankruptcy right away, but you will know that you have a plan in place to eliminate as much tax as possible."