There answer to that question is that it depends. There are two tests that have to be met.
1. Has the return been on file long enough?
Were all of the related returns (i.e. all your tax returns for the tax years for which these taxes are owed) filed on a timely basis, and has it been 3 years since the last date such returns were due including all extensions? [Note: This means that for tax year 2006, the return with extension would be due Oct. 15th, 2007, and you’d have to wait three years from that date. But if Oct 15th fell on a weekend, then the return would actually be due Oct 16th or 17th, and you’d have to wait three years from that date. It’s very tricky. ]
2. Has the amount owed to the IRS been settled/assessed for at least two years?
If your return was ever challenged or if the amount you owed to the IRS was ever unclear for any reason, then you must also wait at least two years from the time the amount owed to the IRS was finally assessed.
If the answer to both questions above is yes, then you can file bankruptcy and discharge the IRS debt. If the answer is no, you can either (a) wait until it has been a long enough period of time and then file bankruptcy, or (b) try an “Offer in Compromise” now and see what happens.
You can find info on Offers in Compromise on www.irs.gov. Or you can hire a tax dispute attorney, to help you try to negotiate a settlement with the IRS. If you decide to go this route, be sure you hire a reputable attorney or CPA and not one of the Fly-By-Night organizations that claim to be able to handle tax problems.
Something to keep in mind – If some of this tax debt is for monies withheld from employees’ paychecks that you failed to forward to the IRS, then the debt may not be dischargeable, and such debt may pierce through a corporation or LLC entity and attach personally to the business owner.