Income Tax Liability
An income tax liability must be paid if it meets any of the following three (3) requirements:
(a) It is for a tax year in which the return was last due, including extensions, 3 years or less prior to the filing of the bankruptcy.[Illustration: As of October 18, 2009, income taxes for tax years 2005 and earlier are not priority taxes. 2006 taxes are priority.]
(b) The tax was assessed within 240 days of the filing of the petition. If an offer in compromise is made during the 240-day period, the running of the 240-day period is tolled during the time in which the offer is pending plus an additional 30 days after the offer in compromise is no longer pending. The assessment of the tax usually occurs within 30-45 days after the tax return is filed. Obviously, if the taxpayer is audited, or the tax is adjudicated for unreported income or other errors in the return, additional assessments may take place at a later date.
(c) The tax was not assessed before the bankruptcy was filed, but was assessable under applicable law or agreement after the bankruptcy was filed. This third rule is inapplicable to taxes for which the debtor did not file the return, filed the return less than 2 years before filing the petition, filed a fraudulent return, or willfully attempted to evade the tax.