Tax Debt and Bankruptcy in Miami

The 3-2-240 Rule for Tax Discharge

Federal income tax debt may be dischargeable if ALL three timing conditions are met:

3 Years

Return due 3+ years before filing

2 Years

Return filed 2+ years before filing

240 Days

Tax assessed 240+ days before filing

Warning: Extensions, amended returns, audits, and prior offers in compromise can toll (pause) these time periods. Get professional analysis before relying on these rules.

Tax Debts That Cannot Be Discharged

Payroll taxes (trust fund): Never dischargeable if you collected employee withholding.
Taxes with no return filed: If you never filed the return, the tax cannot be discharged.
Fraudulent returns: Willful fraud or evasion.
Recent assessments: Assessed within 240 days of filing.
Tax liens: Recorded federal tax liens survive bankruptcy and attach to property owned at filing.

Florida Tax Considerations

Florida has no state income tax, so tax debt in Miami bankruptcy cases is limited to federal IRS obligations and local property taxes. Miami-Dade County property taxes can create significant liens that survive bankruptcy unless addressed in a Chapter 13 plan. The three-year, two-year, and 240-day rules for discharging IRS debt apply.

Chapter 7 vs. Chapter 13 for Tax Debt

Chapter 7

Discharge qualifying tax debts entirely
Must pass the means test
Tax liens survive on existing property
Best for old taxes meeting 3-2-240 rules

Chapter 13

Priority taxes paid in full over 3-5 years
No penalties or additional interest during plan
Stops all IRS collection including levies
Best for recent non-dischargeable taxes

Frequently Asked Questions

Can tax debt be discharged in bankruptcy?

Some tax debt can be discharged if it meets the 3-2-240 rules: return due 3+ years ago, filed 2+ years ago, assessed 240+ days ago. Florida has no state income tax, so only federal taxes apply.

What tax debts cannot be discharged?

Payroll taxes, taxes with no return filed, fraudulent returns, and taxes assessed within 240 days generally cannot be discharged. Tax liens survive bankruptcy.

What are the 3-2-240 rules for tax discharge?

Three timing rules: (1) return due 3+ years before filing, (2) return filed 2+ years before filing, (3) tax assessed 240+ days before filing. All three must be met.

Can Chapter 13 help with non-dischargeable tax debt?

Yes. Chapter 13 lets you pay non-dischargeable tax debt over 3-5 years without penalties or additional interest. The automatic stay stops all IRS collection.

Does the IRS garnish wages differently?

Yes. The IRS can levy wages without a court judgment. Bankruptcy stops IRS levies immediately. Florida has no state income tax, so tax debt in Miami bankruptcy cases is limited to federal IRS obligations and local property taxes. Miami-Dade County property taxes can create significant liens that survive bankruptcy unless addressed in a Chapter 13 plan. The three-year, two-year, and 240-day rules for discharging IRS debt apply.

Should I file an offer in compromise or bankruptcy in Miami?

It depends on your total debt. An OIC settles tax debt for less but takes 12+ months. Bankruptcy may be faster and addresses other debts simultaneously.