Posted by NCBRC - February 11th, 2020
The Eleventh Circuit broke with the First, Fifth and Tenth Circuits to find that section “523 does not incorporate a mandatory precondition that a tax return must be timely filed to be dischargeable.” Mass. Dept. of Rev. v. Shek, No. 18-14922 (11th Cir. Jan. 23, 2020).
The debtor filed his 2008 Massachusetts tax return seven months late. Six years later, he filed for chapter 7 bankruptcy in Florida. After discharge, the Massachusetts Department of Revenue commenced collection efforts to collect on the 2008 tax liability. Mr. Shek reopened his bankruptcy seeking to have that debt included in his discharge. Both he and the MDOR filed for summary judgment. The bankruptcy court found that, under the Beard test, section 523(a) did not except Mr. Shek’s tax liability from discharge. The district court affirmed. [blogged here]The MDOR appealed to the Eleventh Circuit. Read More
Posted by NCBRC - January 22nd, 2019
The District Court for the Middle District of Florida declined to follow the First Circuit’s direction on treatment of tax debts based on late-filed returns, and instead applied the pre-BAPCPA Beard test to find that the debtor’s Massachusetts state tax debt was discharged in bankruptcy. Mass. Dept. of Rev. v. Shek, No. 18-341 (M.D. Fla. Nov. 13, 2018). Read More
Posted by NCBRC - May 12th, 2017
The Third Circuit entered the late-filed tax return fray and applied the Beard test to the question of whether such return, filed post-IRS assessment, is a “return” for dischargeabilty purposes. It found that, at least in this case, it was not. Giacchi v. United States, No. 15-3761 (3rd. Cir. May 5, 2017).
Thomas Giacchi filed his income tax returns after the IRS had performed an independent assessment. The bankruptcy court found that his return was not a “return” within the meaning of section 523(a)(1)(B) and, therefore, the taxes were non-dischargeable. The district court affirmed. Read More
Posted by NCBRC - February 24th, 2017
The Supreme Court denied cert. in the case of Smith v. I.R.S., No. 16-497 (U.S.) dashing hopes of a definitive resolution of the issue of whether a late-filed tax return may constitute a “return” within the meaning of the hanging paragraph to section 523(a) (petition denied, (Feb. 21, 2017)). As NACBA/NCBRC argued in its amicus brief in support of certiorari, the question has deeply divided the courts with the Eighth Circuit relying on the accuracy of the documents purporting to constitute the return and permitting discharge if a bankruptcy petition is filed two years after a late-filed return, Colsen v. United States (In re Colsen), 446 F.3d 836 (8th Cir. 2006); the Fourth, Sixth, Seventh, Ninth and Eleventh Circuits, finding that once the IRS has made its own assessment of tax liability the late-filed return is not considered a return for purposes of bankruptcy dischargeability, e.g. Smith v. United States (In re Smith), 828 F.3d 1094 (9th Cir. 2016); and the First, Fifth and Tenth Circuits taking the draconian approach epitomized by McCoy v. Mississippi State Tax Comm’n (In re McCoy), 666 F.3d 924 (5th Cir. 2012), that all taxes described on late-filed returns—even those filed one day late for any reason—are barred from discharge. Unfortunately, given the sharp divide between circuits, treatment of a late-filed return will continue to be based on luck of the geographical draw.
Posted by NCBRC - September 22nd, 2016
A late-filed tax return is not an “equivalent report” for purposes of dischargeability. Nilsen v. Mass. Dept. of Rev., No. 16-10148 (D. Mass. Sept. 6, 2016). Johan Nilsen filed several of his state and federal tax returns one to five years late. Neither the IRS nor the state department of revenue had conducted their own assessment of Mr. Nilsen’s taxes prior to his filing. After some of his debts were discharged in chapter 7 bankruptcy, Mr. Nilsen filed an adversary complaint seeking to discharge his tax debts. The bankruptcy court granted the tax authorities’ motion for summary judgment finding that the tax debts were nondischargeable under section 523(a)(1)(B). In re Nilsen, 542 B.R. 640 (Bankr. D. Mass. 2015). Read More
Posted by NCBRC - September 15th, 2016
Whether a post-assessment tax return represents an honest and reasonable attempt to comply with tax laws and is a “return” within the meaning of section 523(a)(*), depends on the taxpayer’s subjective intent and the content of the information provided in the late-filed return. Biggers v. I.R.S., No. 15-41 (M.D. Tenn. Sept. 9, 2016).
After Pamela and James Biggers failed to file tax returns for several years, the IRS assessed federal taxes against James. In February, 2007, approximately one year after the IRS performed its final tax assessment, the Biggers filed joint tax returns for the years that had been assessed against James. Their returns showed different tax liability than that which had been determined by the IRS with several years claiming a lower liability and one year claiming higher liability. The Biggers then filed a chapter 7 bankruptcy petition and sought to discharge their tax debts for those years. Read More
Posted by NCBRC - August 15th, 2016
A tax return filed seven years after it was due and three years after the IRS conducted its independent assessment does not meet the test for an “honest and reasonable” attempt to comply with tax laws. Smith v. IRS, No. 14-15857 (9th Cir. July 13, 2016). Read More
Posted by NCBRC - April 15th, 2016
The Eleventh Circuit applied the Beard test to the question of whether and when a late-filed tax return is a “return” for purposes of dischargeability. The court adopted the middle ground finding that timing is relevant to the issue of the debtor’s “honest and reasonable” attempt to comply with tax laws. Justice v. U.S.A., No. 15-10273 (11th Cir. March 30, 2016). Read More
Posted by NCBRC - January 12th, 2016
The Bankruptcy Appellate Panel for the Ninth Circuit found that the bankruptcy court erred by failing to follow Ninth Circuit precedent when it held that a late-filed tax return is a “return” for purposes of dischargeability so long as it meets the objective test of proper form and substance. United States v. Martin, No. 14-1180 (B.A.P. 9th Cir. Dec. 17, 2015). Read More
Posted by NCBRC - October 6th, 2015
The bankruptcy court for the district of New Jersey bucked the current trend, and “agree[d] with those decisions that hold that the timing of the filing is not a factor in determining whether the document meets the definition of a ‘return.’”In re Davis, No. 14-26507 (Bankr. D. N.J. Sept. 29, 2015). See also, In re Maitland, 531 B.R. 516 (Bankr. D. N.J. 2015). Read More
