Bankruptcy and IRS Tax Debt
Rates and standards last checked against IRS.gov: November 6, 2026
Bankruptcy can wipe out some older income tax debt, but only if every timing test is met. This guide explains which taxes qualify, what happens to collection during the case, and why a tax lien can outlast the discharge.
Quick answer
Can bankruptcy wipe out IRS tax debt?
Sometimes. Older federal income tax can be discharged if the return was due over 3 years ago, filed over 2 years ago, and assessed over 240 days ago, with no fraud. Recent taxes, unfiled years and liens already filed generally survive.
Who this applies to: Individuals with federal income tax debt who are considering Chapter 7 or Chapter 13 bankruptcy.
What can change this answer
- Each tax year is tested separately against the filing date.
- Years with no return filed can't be discharged.
- A lien filed before the case can still attach to property you owned.
Recommended next step
Pull your IRS account transcripts to find each year's filing and assessment dates, then take them to a bankruptcy attorney.
Reviewed by Joseph Lancaster, 13+ years in tax resolution.
Key facts
| Item | Fact | Source |
|---|---|---|
| Return due date test | Return last due more than 3 years before filing | 11 U.S.C. § 507 |
| Filed return test | Return actually filed more than 2 years before filing | 11 U.S.C. § 523 |
| Assessment test | Tax assessed more than 240 days before filing | 11 U.S.C. § 507 |
| Never dischargeable | Unfiled returns, fraudulent returns, willful evasion | IRS Publication 908, Bankruptcy Tax Guide |
| Collection during the case | Stopped by the automatic stay | 11 U.S.C. § 362 |
| IRS collection clock | Paused during the case, plus 6 months | IRC § 6503 |
Compiled November 10, 2026 from the linked primary sources.
Which tax debts can bankruptcy discharge?
Federal income tax for a given year can be discharged only if it meets all of these tests. Each year is checked on its own, so some years may qualify while others don't.
- The return was last due, including extensions, more than 3 years before you filed bankruptcy
- You actually filed that return more than 2 years before you filed bankruptcy
- The IRS assessed the tax more than 240 days before you filed bankruptcy
- The return wasn't fraudulent and you didn't willfully try to evade the tax
Time when an offer in compromise was pending, or when an earlier bankruptcy was open, can extend these windows. Payroll trust fund taxes withheld from employees generally can't be discharged at all.
Unfiled years don't qualify
Source: IRS Publication 908
Does bankruptcy stop IRS collection?
Yes, while the case is open. Filing triggers the automatic stay, which bars the IRS from levying wages or bank accounts and from filing new liens to collect taxes that arose before the filing. The IRS can still audit your returns and assess tax during the case.
The stay also pauses the IRS's 10-year collection deadline for as long as collection is barred, plus 6 months. If a debt isn't discharged, the IRS gets that time back.
What happens to a federal tax lien?
A Notice of Federal Tax Lien filed before your petition generally survives bankruptcy. Your personal liability may be discharged, but the IRS can still collect from property you owned before the case, such as equity in a home or retirement account. If no lien was filed before the case, a discharged tax generally can't be collected that way.
Read more about how liens work and when they can be released in our tax lien guide.
Chapter 7 or Chapter 13?
In Chapter 7, qualifying taxes are discharged and the rest remain. In Chapter 13, you repay debts through a 3-to-5-year plan; priority taxes, which include most recent income taxes, generally must be paid in full through the plan. Chapter 13 also requires you to file all returns for the 4 years before the case.
If your taxes don't meet the timing tests yet, an IRS option may work better or buy time: an installment agreement, Currently Not Collectible status, or an Offer in Compromise.
What to bring to a bankruptcy attorney
The dates on these records decide whether your tax debt can be wiped out, so bring them to the first meeting.
- IRS account transcripts for every year you owe (they show return filing and assessment dates)
- Copies of the returns for those years, and when you actually filed them
- Any substitute-for-return or audit notices for those years
- Notices of Federal Tax Lien, if the IRS filed any
- Records of any offer in compromise or earlier bankruptcy (both can extend the timing tests)
- Your last 4 years of filed returns (required in Chapter 13)
Frequently asked questions
Can you file bankruptcy on IRS tax debt?
Yes, and some federal income tax debt can be discharged. The tax must pass three timing tests: the return was due more than 3 years before you filed, you filed the return more than 2 years before, and the tax was assessed more than 240 days before. Fraud or willful evasion disqualifies the debt.
What is the 3-2-240 rule?
It's shorthand for the three timing tests in the Bankruptcy Code. 3 years since the return was due (including extensions), 2 years since you actually filed it, and 240 days since the IRS assessed the tax. Missing any one keeps that year's tax from being discharged.
Does bankruptcy stop IRS collection?
Yes, while the case is open. Filing triggers the automatic stay, which bars the IRS from levying or filing new liens to collect pre-bankruptcy taxes. The IRS can still audit you and assess tax.
What happens to a federal tax lien in bankruptcy?
A lien filed before your petition generally survives, even if your personal liability is discharged. The IRS can still collect from property you owned before the bankruptcy, such as home equity.
Can I discharge taxes for years I never filed?
No. Tax for a year with no return filed isn't dischargeable. A substitute return the IRS prepared for you generally doesn't count as your return.
Does bankruptcy affect the IRS collection deadline?
Yes. The 10-year collection period is paused while the IRS is barred from collecting, plus 6 months. Filing bankruptcy on a debt that won't be discharged can push its expiration date back.
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