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Income taxes that came due and owing over three years previously–this means 2007 and prior right now and 2008 as of next April 15–are dischargable provided there was no fraud and the debtor filed a return at least two years before filing bankruptcy and the tax has been assessed (meaning IRS sent a first bill) for at least 240 days. If IRS has not filed a Notice of Federal Tax Lien, the tax is an unsecured debt that is fully discharged.

If IRS has filed a Notice of Federal Tax Lien the tax is discharged except to the extent the lien attaches to exempt assets in the bankruptcy that are not exempt from the IRS lien. In a Chapter 13 case, the same dischargability rules apply and for other taxes, you can propose a plan to pay the tax but not penalties.

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