• Home
  • Bankruptcy in Brief
  • ABC’s of Bankruptcy
  • Considering Bankruptcy
  • True Stories
  • Chapter 13
  • Blog
  • About
  • TOC

Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box
  • How bankruptcy works
  • Mortgage Matters
  • Consumer Rights
  • You & Your Lawyer
  • Small Business
  • Family Law

Deal With Your Taxes After Bankruptcy

By Cathy Moran

taxes after bankruptcy

When you’ve still got taxes after bankruptcy, things can get complicated.

That’s because some taxes got discharged in bankruptcy, while others may live on.

The taxes that live on get an extension on their life span.

And liens after Chapter 7 just keep on chugging.

So let’s make sense of taxes after bankruptcy.

Which taxes not discharged

Three kinds of taxes don’t get discharged in bankruptcy:

  • recent income taxes;
  • taxes for which no return was filed; and
  • the trust fund portion of employment taxes if you have employees.

There are some others, but these are the common survivors.

How long do taxes live?

Tax liability isn’t forever. Federal law limits how long the IRS may collect past due taxes. The general rule allows collection for 10 years from assessment of the tax.

Usually assessment happens when the IRS logs in your tax return. Or it may happen following an audit. But assessment is the starting point.

Life of tax extended by bankruptcy

The collectability of a tax not discharged in bankruptcy is extended by the time the taxpayer’s bankruptcy case was open, plus six months. See IRC 6503

So, the collection clock stops ticking while you are in bankruptcy, and doesn’t resume ticking until six months after the case is closed.

Tax liens after discharge

The basic rule about tax liens is that, without a further order of the bankruptcy court, a tax lien remains enforceable after a bankruptcy discharge.

If the tax for the year associated with the lien is discharged, then the lien doesn’t attach to anything you acquire after bankruptcy.

Conversely, if the tax was not discharged, the lien will continue to attach to newly acquired assets.

Chapter 13 cuts liens down to size

State taxes treated the same

State taxes are subject to discharge, just like federal taxes. However the collection statute for state taxes is a matter of state law.

For instance, the California tax collection statute gives the state 20 years to collect California taxes.

So the state’s general collection period may differ from the IRS and any additional period added to the collection statute by reason of bankruptcy.

More

Tax penalties in bankruptcy

Chapter 13 is a tax tool

More from the Soapbox

  • California drivers score huge bankruptcy winCalifornia drivers score huge bankruptcy win
  • Bankruptcy Discharge For One Spouse Yields Benefits For Non-filing SpouseBankruptcy Discharge For One Spouse Yields Benefits For Non-filing Spouse
  • The Thousands That Sat In Mortgage Suspense AccountThe Thousands That Sat In Mortgage Suspense Account
  • Do I qualify for bankruptcy in the Bay Area?Do I qualify for bankruptcy in the Bay Area?
  • What Can Bankruptcy Do About Back TaxesWhat Can Bankruptcy Do About Back Taxes

Filed Under: Taxes Tagged With: 2022, tax liens, taxes

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

How Bankruptcy Works

What Happens To Your Bank Account in Chapter 13

Those considering filing a Chapter 13 bankruptcy worry about "what happens to my bank account?" Will the trustee take all the money? How do I pay my living expenses after I file? The short answer is: nothing changes. The account remains yours and available for all the expenses of day to day living. Because, … Read more

More Posts from this Category

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700
Phone: (650) 368-4700

Categories

All content copyright © Moran Law Group. All rights reserved.