The case of US v. Coney was recently decided by the 5th Circuit Court of Appeals, which reviews federal court decisions for the states of Texas, Louisiana and Mississippi. U.S. v. Coney, 689 F. 3d 365, 5th Cir. 2012.
The United States had obtained a $2.6 Million+ judgment against the Coneys, and the Coneys argued that the tax had been discharged in a previous Chapter 7 bankruptcy that they had filed. Well, that could have been the case, except that Mr. Coney had been a high-flying personal injury lawyer that had made a lot of money, at least partly by illegally hiring and paying "runners" to find cases for him.
He had his staff take out large amounts of cash to pay the runners, but had the staff keep the daily withdrawals to under $10,000 to hide it from the I.R.S. The Coneys also allegedly coached one of the employees to lie to a grand jury about the situation.
You can read the case yourself, but the bottom line is that if you "willfully attempt to evade or defeat the tax," it is not going to be a debt that you can discharge in a bankruptcy. The 5th Circuit quoted part of the Bankruptcy Code, Sec. 523, that states the exceptions to discharge: 11 U.S.C. Â§ 523(a)(1)(C) is one such exception.
It provides: (a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debtâ (1) for a tax . . .â (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax[.] So, the lesson is pretty obvious. Don't expect to discharge IRS taxes in bankruptcy if you engaged in the kinds of conduct that the Coneys did.