You can bankrupt income taxes in a Chapter 7 or 13 bankruptcy but only if all of the income tax rules are met.  This is a power point in pdf format that explains how to File Bankruptcy on Income Taxes. 

 1. First you have to file the income tax return.  The income tax return must be filed at least two years ago prior to filing bankruptcy.   The Income Taxes must have become due at least three years ago.  An income tax debt does not become due until the return is due to be filed.  As an example if the 2002 year return was filed on January 15th 2003 it still became due on April 15th 2003 and was not dischargeable in bankruptcy until April 16th 2006.   If you filed an extension, then normally October 15, is the due date.  If the 15th falls on a Saturday or Sunday, the return wasn't due until a following Monday.

If you fail to file a return the IRS will often file a substitute tax return for your tax return.   In that case the time never runs since the tax return was never properly filed and assessed.   There is no good faith filing to an IRS generated return. 

2.  Taxes other than income, such as payroll taxes, a 100% penalty, Trust Fund Recovery penalties, fraud penalties, or several other unusual types of taxes are excepted from bankruptcy discharge but can be repaid in full in a Chapter 13 bankruptcy. 

Income taxes over 3 years old and that have been filed over two years prior to filing bankruptcy are treated the same as any other unsecured debt.  Income taxes do not have to be paid in full in a Chapter 13.

3. If an income tax was assessed within 240 days prior to filing your bankruptcy you may have to wait until 240 days have passed to discharge the debt.       

4. In order to bankrupt your taxes and not lose property the tax debt must be unsecured or your equity in the property must not exceed your exemptions in the property.  The IRS lien is a statutory lien and cannot be avoided by a 522(f) motion but the IRS will amend it's claim in a Chapter 13 to the amount it is secured. After 10 years the lien expires automatically.   

5. There is no discharge for fraudulent tax returns and willful evasion.

6. Limitations on the time allowed to the IRS to collect such as non filing of a return, requesting a due process hearing, an offer in compromise or filing a  bankruptcy, "tolls," or extends the "3-Year Rule" and the "240 day rule".  The time rules (3-Year, 2-Year and 240-Day) are extended by the period of bankruptcy plus an additional 6 months.  If you file an Offer in Compromise, the 240-Day period is extended by the period it is under IRS consideration, plus 30 days.  For more information download our manual.

The Bankruptcy Manual discusses how to bankrupt taxes.  Download your free copy.

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