Taxpayers will be denied a discharge if they filed a fraudulent tax return.
The US Bankruptcy Code was drafted to help honest taxpayers who struggle paying their general unsecured income taxes. These tax debts can be eliminated and are dischargeable. The Bankruptcy Code was NOT drafted to benefit dishonest taxpayers who intentionally evade their tax obligations. The Bankruptcy Code looks with disfavor upon tax protestors and taxpayers who invent or follow dishonest tax avoidance schemes.
Taxpayers who file fraudulent tax returns are not entitled to discharge their unpaid tax obligations. 11 U.S.C. Section 523(a)(1)(C). Taxpayers who file fraudulent tax returns are also subject to criminal prosecution.
The blog posts contain some interesting legal cases involving taxpayers attempts to discharge income tax debt by filing bankruptcy.