Bankruptcy is intended to give you a fresh start- all of your credit card debt, medical bills, deficiency judgments and unsecured debt become nothing more than a bad memory. But what about your nasty tax liabilities? Will they follow you forever? This is a question my clients frequently ask.
Well, it depends.
In general, if returns were properly filed (even though the taxes were not paid) income taxes more than three years old can be discharged in bankruptcy. Pay attention: only income taxes are dischargeable; other taxes, such as payroll taxes or fraud penalties cannot be discharged. Penalties on taxes that are dischargeable are also discharged.