THE 3 YEARS, 2 YEARS, AND 240 DAY RULES
The Bankruptcy Code sets out specific time periods that determine if you can discharge your taxes, commonly called the 3-year, 2-year, and 240-day rules (the “3-2-240 rules”). Under these rules, you can discharge income taxes that came due three years before you file for bankruptcy, as long as it has been at least two years since you filed the tax forms and 240 days since the taxes were assessed. There are some exceptions, and these rules do not apply to other types of taxes, such as property taxes.
To discharge back income taxes you must meet the requirements of all three rules.
1. The 3-Year Rule. This rule states that to discharge your back income taxes, they must become due at least three years before you file for bankruptcy. Bankruptcy Code §507(a)(8)(A)(i). Typically, your federal and most state income taxes are due April 15th of each year.
*Remember however that if you get an extension of time to file, the three-year period runs from the date that the taxes are due under the extension.
2. The 2-Year Rule. Under the 2-year rule, your income tax returns must have been filed at least two years before you file your bankruptcy petition.
3. The 240-Day Rule. Taxes must have been assessed by the taxing agency at least 240 days before you file for bankruptcy under this rule or not assessed at all.
Tolling. Some actions can add additional time to some or all of the 3-2-240 time requirements, including (a) making an offer in compromise, (b) having filed for bankruptcy previously, or (3) obtaining a taxpayer assistance order. The time periods noted above are tolled (suspended) while any of these events are pending. However, entering into a payment arrangement with the IRS or another taxing agency does not toll the time periods under the 3-2-240 rules.