Can bankruptcy wipe out tax debt in California?

Sometimes. Income taxes can be discharged when the return was due at least three years before the bankruptcy filing, the return was actually filed at least two years before, and the tax was assessed at least 240 days before (11 U.S.C. §§ 507(a)(8), 523(a)(1)). Payroll trust-fund taxes and fraud-related taxes never discharge.

Income tax discharge is a timing puzzle with three interlocking clocks: the return must have been due — including extensions — more than three years before the petition, actually filed more than two years before, and the tax assessed more than 240 days before (11 U.S.C. §§ 507(a)(8), 523(a)(1)). Each period can be tolled by events like prior bankruptcies and pending offers in compromise, and an extension moves the due date, so precision matters: account transcripts showing filing and assessment dates should be pulled before choosing a petition date. Hard limits remain — taxes tied to fraudulent returns or willful evasion never discharge, and trust-fund payroll taxes follow the responsible person permanently. A pre-petition recorded tax lien also survives against property owned at filing: the discharge ends personal liability, not the lien. California income taxes follow the same general framework. Where the years are too recent to discharge, Chapter 13 pays the priority tax through the plan while stopping further penalties from accruing.

Authority: 11 U.S.C. § 523(a)(1)