What is the three-year rule for tax dischargeability?

Under 11 USC § 507(a)(8)(A)(i), an income tax is non-dischargeable if the return was last due, including extensions, within three years of the bankruptcy filing. For a typical 2022 return due April 15, 2023, this period closes around April 15, 2026. Extensions push the date out. Any tolling event such as a prior bankruptcy or an offer in compromise extends the period further.

What is the two-year rule for filed returns?

11 USC § 523(a)(1)(B)(ii) makes a tax non-dischargeable if the return was filed within two years before the bankruptcy. If you filed your 2018 return late on January 1, 2026, that tax debt is not dischargeable until January 1, 2028 at the earliest. Several circuits have held that a substitute return prepared by the IRS does not count as a return for this purpose, making the related tax permanently non-dischargeable.

What is the 240-day assessment rule?

Under 11 USC § 507(a)(8)(A)(ii), a tax is non-dischargeable if it was assessed within 240 days before the bankruptcy filing. Assessment happens when the IRS officially records the tax on its books, usually after an audit or a CP-series notice. The 240-day window is tolled by certain events such as an offer in compromise plus 30 days or a prior bankruptcy plus 90 days.

Does bankruptcy wipe out an IRS tax lien?

No. A discharge eliminates personal liability for an otherwise dischargeable tax, but a properly filed federal tax lien survives bankruptcy and continues to attach to property the debtor owned at filing under 11 USC § 522(c)(2)(B). To remove the lien from a specific asset you need a lien release, a Certificate of Discharge from the IRS, or in Chapter 13 a lien-stripping order if the lien is wholly unsecured.

Are payroll taxes, sales taxes, and trust-fund taxes dischargeable?

No. Trust-fund employment taxes under 26 USC § 7501 and the trust-fund recovery penalty under 26 USC § 6672 are excepted from discharge as priority taxes under 11 USC § 507(a)(8)(C). Sales taxes collected from customers are treated similarly. These are core non-dischargeable taxes regardless of how old they are.

Can You File Bankruptcy on Taxes? IRS Debt Discharge Rules

Yes, but only if the tax meets every test in 11 USC § 507(a)(8) and § 523(a)(1). The tax must be income tax, the return must have been due more than three years before filing, the return must have been actually filed more than two years before filing, the tax must have been assessed more than 240 days before filing, and there must be no fraud or willful evasion. All five must be satisfied.

The 3-2-240 Rule for Tax Discharge

Some income tax debts can be discharged in bankruptcy if they meet ALL of these conditions:

3-year rule: The tax return was due at least 3 years before filing (including extensions)
2-year rule: The return was actually filed at least 2 years before filing bankruptcy
240-day rule: The IRS assessed the tax at least 240 days before filing (or the tax has not been assessed at all)

If all three conditions are met AND the return was not fraudulent or a late-filed substitute return, the income tax debt is dischargeable.

Trust fund taxes are NEVER dischargeable: If you operated a business and failed to remit payroll taxes (the employee's share of FICA, withheld income tax), those "trust fund" taxes cannot be discharged in any chapter of bankruptcy.

Taxes That Cannot Be Discharged

Recent income taxes: Returns due within 3 years of filing
Trust fund / payroll taxes: Never dischargeable
Tax fraud penalties: If you filed a fraudulent return or willfully evaded taxes
Unfiled returns: Taxes for years where you never filed a return (some courts also reject "substitute for return" assessments by the IRS)
Tax liens: Even if the underlying tax is discharged, a recorded tax lien survives bankruptcy and attaches to property you owned at filing. You must pay the lien to clear title.

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