Can Bankruptcy Discharge IRS Tax Debt in Nevada?
Owing the IRS can feel like an inescapable trap — penalties and interest compound daily, and the IRS has collection powers that ordinary creditors do not. IRS tax debt bankruptcy Nevada residents pursue has one critical advantage over most debt relief options: it can permanently eliminate federal income tax liability. At Riggs Law Firm, attorney Dan Riggs reviews your tax transcripts to determine whether IRS tax debt bankruptcy Nevada law allows you to discharge what you owe.
IRS Tax Debt Bankruptcy Nevada — The Three-Year Discharge Rule
Federal income tax debt can be discharged in bankruptcy if all of the following conditions are met:
- Three-year rule: The tax return was due at least three years before you file for bankruptcy (including valid extensions).
- Two-year rule: You filed the tax return at least two years before filing for bankruptcy.
- 240-day rule: The IRS assessed the tax at least 240 days before your bankruptcy filing.
- No fraud or willful evasion: The tax was not assessed due to a fraudulent return or willful tax evasion.
What About Payroll Taxes and Recent Tax Years?
Not all IRS debt qualifies for discharge. The following are generally non-dischargeable: payroll taxes (trust fund taxes), income taxes from the last three years, and existing IRS tax liens on your property (the lien survives bankruptcy even if the underlying tax is discharged).
IRS Tax Debt Bankruptcy: Chapter 7 vs. Chapter 13
Chapter 7 can wipe out qualifying older income tax debt in about 3–4 months. Non-qualifying tax debt is not eliminated, but the automatic stay stops IRS collection during the case.
Chapter 13 is often the better tool when you have a mix of dischargeable and non-dischargeable tax debt. Priority tax debt must be paid in full through the repayment plan over 3–5 years — with no additional interest or penalties accruing — rather than dealing with IRS levies and garnishments. Older qualifying tax debt may be discharged at the end of the plan.
The Automatic Stay Stops IRS Collection
Filing bankruptcy immediately triggers the automatic stay, which stops all IRS collection actions including bank levies and seizures, wage garnishments, new tax liens, and notices of intent to levy. The stay gives you breathing room while the court process proceeds.
IRS Tax Debt Bankruptcy Nevada — Why Choose Riggs Law Firm
Tax debt bankruptcy is one of the most technical areas of bankruptcy law. Dan Riggs spent years inside the bankruptcy system as a Chapter 13 trustee, reviewing hundreds of cases involving priority tax claims. He knows how to analyze your tax transcripts, calculate whether your debt meets the discharge rules, and structure a Chapter 13 plan that handles the IRS efficiently. His flat $2,000 attorney fee for Chapter 7 means you know your costs upfront.
Frequently Asked Questions About IRS Tax Debt Bankruptcy
Can Chapter 7 bankruptcy eliminate IRS tax debt?
Yes, if the tax debt meets the three-year, two-year, and 240-day rules and was not assessed due to fraud. Qualifying income tax debt is fully dischargeable in Chapter 7.
What happens to recent IRS tax debt in bankruptcy?
Tax debt from the last three years is a priority claim and cannot be discharged. In Chapter 13, it must be paid in full through your repayment plan without additional penalties or interest accruing.
Does bankruptcy stop an IRS levy or garnishment?
Yes. Filing bankruptcy triggers the automatic stay, which immediately halts IRS collection actions including bank levies, wage garnishments, and notices of intent to levy.
Can bankruptcy eliminate IRS payroll tax debt?
No. Trust fund taxes (payroll taxes) are not dischargeable in bankruptcy and must be paid in full.
What if the IRS has already filed a tax lien on my property?
A tax lien filed before your bankruptcy survives the discharge and remains attached to your property. The underlying personal liability may be discharged, but the lien must be addressed separately through lien avoidance motions or IRS negotiation.
Not sure if your IRS debt qualifies for discharge? Call Riggs Law Firm at (702) 605-5070 for a free consultation. Dan Riggs will review your situation and give you a straight answer. Serving Las Vegas, Henderson, North Las Vegas, and all of Clark County.
IRS Tax Debt Discharge Rules: The 5-Part Test (Nevada)
| Rule | Requirement | Why It Matters |
|---|---|---|
| 3-Year Rule | Tax return was due at least 3 years ago (including extensions) | Most recent tax years are NOT dischargeable |
| 2-Year Rule | Tax return was actually filed at least 2 years ago | Late-filed returns still count if filed 2+ years prior |
| 240-Day Rule | IRS assessed the tax at least 240 days before filing | Assessment resets the clock on offers in compromise |
| No Fraud | Tax return was not fraudulent | Willful evasion permanently bars discharge |
| No Willful Evasion | No willful attempt to evade tax | Applies even if return was filed |
Dischargeable vs. Non-Dischargeable Tax Debt in Nevada Bankruptcy
| Tax Debt Type | Chapter 7 | Chapter 13 |
|---|---|---|
| Old income tax (meets 5-part test) | ✓ Dischargeable | ✓ Paid as unsecured (pennies on dollar) |
| Recent income tax (within 3 years) | ✗ Not dischargeable | Paid in full through plan |
| Payroll/Trust Fund taxes | ✗ Never dischargeable | Must be paid in full |
| Tax penalties on dischargeable debt | ✓ Usually dischargeable | ✓ Usually dischargeable |
| Tax liens (pre-bankruptcy) | Lien survives on existing property | Can strip some junior liens |
| Nevada state income tax | N/A — Nevada has no income tax | N/A — Nevada has no income tax |