Discharging Federal Tax Debt in Bankruptcy: Rules Florida Residents Should Know

Bankruptcy can provide a fresh start when faced with overwhelming debt, but most people think it doesn’t apply when dealing with the Internal Revenue Service (IRS). Florida taxpayers facing financial hardships are often surprised to learn that, under certain conditions, federal taxes can be discharged.

While it’s not always an option and the rules are strict, you may qualify for relief depending on the age of the debt, the type of tax owed, and how you filed your return. If you are considering bankruptcy, our experienced Florida tax-IRS attorney explains when tax debt qualifies and how it can protect against aggressive IRS collection actions.

When Can IRS Tax Debt Be Discharged in Florida Bankruptcy Cases?

Not all tax debt qualifies for discharge. Under the U.S. Bankruptcy Code and Internal Revenue Service (IRS) guidelines, only income tax debt is potentially dischargeable, and only if it meets specific requirements. These include:

• The tax return was due at least three years before the bankruptcy filing.
• You filed your return at least two years before filing for bankruptcy.
• The IRS assessed the tax debt a minimum of 240 days before bankruptcy.
• There is no fraud or willful evasion involved in the return.

Florida residents filing for Chapter 7 or Chapter 13 bankruptcy may be able to include qualifying tax debts, but it requires proper documentation and timing. Also, other types of tax debts, including payroll taxes or fraud penalties, typically cannot be discharged.

How Bankruptcy Affects IRS Collection Actions in Florida

When you file for bankruptcy in Florida, an automatic stay goes into effect. The IRS must temporarily stop all collection activity. This includes any bank levies, wage garnishments, or property seizures.

According to federal law, this stay remains in place while the bankruptcy case is active, giving Florida taxpayers immediate protection. Other ways filing for bankruptcy may help in managing federal tax debts include:

• Allows discharge of qualifying tax debt in Chapter 7 cases.
• Enables structured repayment through Chapter 13 for non-dischargeable tax debt.
• Provides time to resolve liens or negotiate releases if the tax debt is satisfied.
• Reduces financial pressure while protecting property and income.

A federal tax lien may remain attached to property even if your tax debts are discharged. Work with a qualified tax attorney who understands how bankruptcy impacts federal taxes and IRS procedures.

For Help In Eliminating Tax Debts, Contact Our Experienced Florida Tax/IRS Attorney

Overwhelmed by tax debt and considering bankruptcy? The decisions you make today can affect your finances for years. Not all tax debt qualifies for discharge, and timing matters.

In addition to being a licensed attorney, Ronald Cutler is also a Certified Public Accountant and former Special Agent for the FBI who handled complex tax cases. With over 50 years of experience, Ronald Cutler can help in determining whether bankruptcy is an option for dealing with your federal tax debts and how to approach the IRS while protecting your rights.

To successfully resolve your tax problems, call or contact our experienced Florida tax/IRS attorney online and request a consultation today.

Sources:

irs.gov/businesses/small-businesses-self-employed/declaring-bankruptcy

uscode.house.gov/view.xhtml?path=/prelim@title11/chapter5&edition=prelim