Bankruptcy (BK) is a very complicated solution to tax liabilities, but is being used more frequently due to the complications and length of time of the Offer in Compromise program or a lengthy Monthly Installment Agreement. It is highly recommended that Bankruptcy be used only with the guidance of professionals in Bankruptcy and tax dischargeability. Chapter 7 Bankruptcy can be used to eliminate income taxes that are over three years old, computed from the due date or extended due date of the return, and the tax must have been assessed for more than 240 days prior to BK filing. In addition, the return(s) must have been filed for more than two years prior to BK filing, there can be no fraud indicated and the return(s) must have been filed by the taxpayer, not by the IRS. A Chapter 7 Bankruptcy cannot be used to eliminate a payroll tax liability if the taxes were accrued within the last three years. However, if the payroll tax liability is over three years old, Bankruptcy can be used to eliminate the employer portion of the FICA/Social Security/Medicare taxes and the penalties and interest, but not the trust fund or withheld income and FICA/Social Security/Medicare taxes. A Chapter 13 or Chapter 11 Bankruptcy is basically a three to five year payment plan under the protection of the Bankruptcy Court that stops IRS enforcement and suspends the running of penalties and interest. The Chapter 13 or 11 can be used for income or payroll taxes. Again, if Bankruptcy is contemplated, it is recommended that you retain the services of a Bankruptcy attorney and possibly a licensed tax professional knowledgeable in Bankruptcy discharge criteria.