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Chapter 7. Confused about discharging tax debt. Would 2010 taxes qualify?

Los Angeles, CA |

I read the hurdles, regarding assessment date three-year-old taxes, etc. But I don't really understand how to apply the three-year rule. In other words if I filed today, could the tax debt I owe from tax year 2010 be dischargeable? It was filed on time. Would it be after April 15?

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Attorney answers 4

Posted

Your 2010 taxes cannot possibly be dischargeable until April of 2014 ... and that's assuming you filed them by the April deadline in 2011.

Posted

No, they would not and don't feel bad. A lot of attorneys don't even handle this, it can be very very confusing. There is an entire process of review surrounding the three year rule to determine whether you can discharge taxes in bankruptcy. By that I mean, when they were filed, if an extension was filed, whether you have a lien, etc. And just so you (and other readings this) know, it's best to have that analysis done before filing. Too many people file "thinking" taxes are dischargeable only to find out they are not, after the fact. Always get an experienced attorney to analyze the dischargeability of your taxes before filing.

Posted

Nope! After 4/15/13 your 2009 taxes would be dischargeable.

Be sure to designate "best answer." If you live in Oregon, you may call me for more detailed advice, 503-650-9662. Please be aware that each answer on this website is based upon the facts, or lack thereof, provided in the question. To be sure you get complete and comprehensive answers, based upon the totality of your situation, contact a local attorney who specializes in the area of law that involves your legal problem. Diane L. Gruber has been practicing law in Oregon for 26 years, specializing in family law, bankruptcy, estate planning and probate. Note: Diane L. Gruber does not represent you until a written fee agreement has been signed by you and Diane L. Gruber, and the fee listed in the agreement has been paid.

Brian Crozier Whitaker

Brian Crozier Whitaker

Posted

... assuming you filed your 2009 tax return on or before 4/15/10 AND nothing tolled that waiting period in the meantime.

Diane L Gruber

Diane L Gruber

Posted

Correct!

Posted

I would amend my colleagues' prior answers slightly. The "three year rule" for discharging taxes is in Bankruptcy Code Section 507(a)(8)(A)(i), and actually starts the 3 year time period ticking from the date the tax return is last due, including extensions, which for individual income tax filers is usually October 15 of the calendar year following the tax year (or the next business day thereafter).

This means that if a bankrupt person filed his/her 2009 1040 tax return before April 15, 2010 (or anytime up to the October deadline), s/he would have to wait until at least October 16, 2013 to file a bankruptcy to satisfy the "three year rule" for discharging tax debt.

You really should obtain free tax transcripts for all the years in question from the IRS, then consult a qualified attorney before deciding what to do and when to file.

This post is for informational purposes only and is not specific legal advice for your matter. Please seek advice of an attorney for guidance in your specific legal matter. I am a lawyer and debt relief agency helping persons file bankruptcy under the U.S. Code.

Diane L Gruber

Diane L Gruber

Posted

Yes! Well said!

Brian Crozier Whitaker

Brian Crozier Whitaker

Posted

I'm sorry ... I must respectfully disagree. The Oct 15 date only kicks in when the April 15 deadline is missed. In your example, if the return was filed by April 15, 2010, it is dischargeable in a BK filed April 16, 2013.

Asker

Posted

Mr. Whitaker's statement seems to make more sense. It's very confusing since some of you are suggesting Oct even if it was filed on time in April.

Michael Frank Chekian

Michael Frank Chekian

Posted

My previous comment was incorrect and I apologize for any confusion created. If you were to timely file an individual tax return for 2009 calendar year on or before April 15, 2010, and if you file bankruptcy on or after April 15, 2013, you will meet the "3 Year Rule" for dischargeability of taxes. If you file an extension for the 2009 tax return and file the tax return between April 16 and October 15 of 2009, then you need to file bankruptcy on or after October 15, 2013 in order to meet the "3 Year Rule" for dischargeability of taxes. (Reference is Collier on Bankruptcy, Volume 4, page 507-59, section 507(a)(8)(A)(i), Resnick & Sommer editors, 16th edition).

Asker

Posted

do you have to do anything special in the bankruptcy, or just list the debt as schedule F debt? Just a curiosity, if somebody files Taxes say one year late, will the same analysis apply?

Brian Crozier Whitaker

Brian Crozier Whitaker

Posted

You can get away with listing the dischargeable (non-priority) taxes on Schedule E or F. If you file your return EXACTLY one year late, the same analysis applies. If it's later than that, you're now looking at the 2-yr rule.

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