Owing taxes to the IRS, Missouri, or Kansas does not necessarily mean bankruptcy cannot help. Some tax debts are dischargeable -- but the rules are strict and timing-dependent.
Contrary to what many people believe, certain income tax debts can be eliminated in bankruptcy. However, the tax must meet all three timing requirements. If any one rule is not satisfied, the tax remains non-dischargeable.
These rules apply equally whether you file in the Western District of Missouri (Kansas City, MO side) or the District of Kansas (Kansas City, KS side).
11 U.S.C. section 507(a)(8)(A)(i) -- The tax return must have been originally due at least 3 years before the bankruptcy filing date. For a 2022 federal return due April 15, 2023, you would need to file bankruptcy after April 15, 2026. If you requested a filing extension, the due date may be pushed to October 15, which extends this window.
11 U.S.C. section 523(a)(1)(B) -- The tax return must have been actually filed at least 2 years before the bankruptcy petition date. If you filed a late return, the clock starts from when you actually filed it -- not when it was due. A return filed in January 2025 would not satisfy the 2-year rule until January 2027, regardless of when it was originally due.
11 U.S.C. section 507(a)(8)(A)(ii) -- The tax must have been assessed at least 240 days before the bankruptcy filing. Assessment typically happens when you file the return or when the IRS completes an audit. An amended return or audit adjustment can restart this clock. Offers in compromise and prior bankruptcy filings can also toll (pause) the 240-day period.
All three rules must be met simultaneously. Missing even one means the tax is a priority claim that cannot be discharged. Get the exact dates from IRS transcripts and state tax records before filing.
Regardless of timing, these tax debts cannot be eliminated in bankruptcy:
In Chapter 13 bankruptcy, taxes that do not meet the discharge timing rules are classified as priority claims under 11 U.S.C. section 507(a)(8). Priority tax claims must be paid in full through your 3-5 year repayment plan.
The advantage of paying priority taxes through Chapter 13:
Missouri state income taxes follow the same federal timing rules for dischargeability. The Missouri Department of Revenue typically files a proof of claim in bankruptcy cases where taxes are owed.
Missouri's statute of limitations for tax collection is generally 10 years from assessment, similar to the IRS.
Kansas state income taxes are also subject to the same three-part discharge test. The Kansas Department of Revenue will file claims in bankruptcy cases filed in the District of Kansas.
If you live on the Kansas side of Kansas City (Wyandotte County, Johnson County), you file in the District of Kansas. Kansas exemptions, including the unlimited homestead exemption, apply to your case.
Critical point: Even when the underlying tax debt is successfully discharged, a properly recorded federal tax lien survives the bankruptcy discharge. The personal liability is eliminated, but the lien remains attached to property you owned at the time of filing.
What this means in practice:
This is one of the most important reasons to get the timing right. If possible, resolving or waiting out the lien before filing can produce a better outcome than discharging the debt while the lien remains.
For a detailed comparison: Chapter 7 vs. Chapter 13. For more on tax debt specifically: bankruptcytaxes.org.
Yes, some tax debts can be discharged in bankruptcy. Federal and state income taxes may be dischargeable if they meet all three timing rules: the tax return was due more than 3 years ago, the return was filed more than 2 years ago, and the tax was assessed more than 240 days ago. Payroll taxes, fraud penalties, and trust fund taxes are never dischargeable.
The 3-year rule under 11 U.S.C. section 507(a)(8)(A)(i) requires that the tax return was originally due at least 3 years before the bankruptcy filing date. For example, a 2022 federal tax return due April 15, 2023 would meet the 3-year rule if you file bankruptcy after April 15, 2026. Extensions can push this date out.
The 2-year rule under 11 U.S.C. section 523(a)(1)(B) requires that the tax return was actually filed at least 2 years before the bankruptcy petition date. Late-filed returns start the 2-year clock from when they were actually filed, not when they were due.
The 240-day rule under 11 U.S.C. section 507(a)(8)(A)(ii) requires that the tax was assessed by the IRS or state tax authority at least 240 days before filing bankruptcy. If you had an audit or amended return that triggered a new assessment, the 240-day clock restarts from the new assessment date.
Missouri state income taxes follow the same three timing rules as federal taxes. The Missouri Department of Revenue files claims in bankruptcy cases. Missouri sales taxes and withholding taxes are trust fund taxes and are never dischargeable.
Kansas state income taxes can be discharged if they meet the same 3-year, 2-year, and 240-day rules. The Kansas Department of Revenue will file a proof of claim in your bankruptcy case. Kansas withholding taxes and sales taxes are trust fund taxes and cannot be discharged.
Yes. Even if the underlying tax debt is discharged, a properly recorded IRS tax lien survives bankruptcy and remains attached to property you owned at the time of filing. The personal obligation is eliminated, but the lien stays on the property until it expires or is paid.
In Chapter 13, priority tax claims must be paid in full through your 3-5 year repayment plan, but without additional penalties or interest accruing. Non-priority tax debts that meet the timing rules can be treated like other unsecured debts and may receive only partial payment.