The debtor’s faxed copies of the IRS adjustment to his federal taxes did not constitute a “return” within the meaning of section 523(a)’s hanging paragraph because the California law process with which his faxes complied was not “similar” to 26 U.S.C. § 6020(a), which authorizes the IRS to prepare a tax return when a taxpayer fails to do so. Sienega v. Calif. Franchise Tax Bd., No. 20-60047 (9th Cir. Dec. 6, 2021). Read More
Tag Archive: Tax Returns
-
Faxed Copies of IRS Tax Adjustments Not a “Return” for Discharge Purposes
Posted by NCBRC - January 4th, 2022
-
Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
Posted by NCBRC - October 25th, 2021
The Ninth Circuit affirmed the opinion of the bankruptcy appellate panel finding that a state-mandated notification to the state taxing authority of a change in the taxpayer’s federal taxes is a “return, or equivalent report or notice,” which, if not filed by the taxpayer, renders the state tax debt nondischargeable under section 523(a)(1)(B). Berkovich v. Cal. Franchise Tax Bd., No 20-60046 (9th Cir. Oct. 14, 2021) (see discussion of In re Berkovich, 619 B.R. 397 (B.A.P. 9th Cir. 2020) here). Read More
-
When a Return Is Not a “Return”
Posted by NCBRC - October 15th, 2021
A tax return filed four years after it was due and one year after the IRS completed its own independent tax assessment is not dischargeable under section 523(a) because it does not meet the “honest and reasonable” standard set forth in the Beard test for what constitutes a “return.” IRS v. Starling, Nos. 20-7478, 20-7954 (S.D.N.Y. Sept. 16, 2021).
When the debtor failed to file his 2002 federal tax return, the IRS, in 2005, sent a notification of delinquency informing the debtor that it had performed its own assessment on his behalf and providing instructions for the debtor to file his own return, contest the one completed by the IRS, or take other action. Upon receiving no response from the debtor, the IRS finalized its assessment in 2006. In 2007, the debtor filed a return for the 2002 taxes which mirrored the assessment conducted by the IRS.
The debtor then petitioned for chapter 13 bankruptcy and the IRS filed a claim for the delinquent taxes. Upon completion of his plan and discharge, the debtor had paid off only a portion of the 2002 taxes. The IRS, and its private collection agency, ConServe, continued to dun him for the remaining tax debt until the statute of limitations rendered the debt uncollectible. The debtor then filed a motion in the bankruptcy court seeking sanctions against the IRS and ConServe for violation of the discharge order, asserting that the tax debt had been discharged in his bankruptcy. The bankruptcy court agreed, In re Starling, 617 B.R. 208 (Bankr. S.D.N.Y. 2020), and, after the court denied its motion for reconsideration, the IRS and ConServe appealed to the district court. Read More
-
Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
Posted by NCBRC - February 8th, 2021
A state-mandated notification with the state taxing authority of a change in the taxpayer’s federal taxes is a “return, or equivalent report or notice,” which, if not filed by the taxpayer, renders the state tax debt nondischargeable under section 523(a)(1)(B). Berkovich v. Calif. Franchise Tax Bd., No. 20-1025 (B.A.P. 9th Cir. Oct. 5, 2020). Read More
-
Tax Debt from Late-Filed Tax Return Dischargeable
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
-
Court Applies Beard Test to Late-Filed Return
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
-
Third Circuit Applies Beard Test to Late-Filed Return Issue
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
-
SCOTUS Declines to Decide Late-Filed Tax Return Issue
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.
-
“Equivalent Report” Workaround Fails in First Circuit
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
-
Court Rejects McCoy and Sticks with Beard
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
-
Request Assistance
Request assistance with a case.
-
Help NCBRC
NCBRC needs your support to protect the rights of consumer bankruptcy debtors. The most effective way to support NCBRC is with a direct donation.
There are many other ways to give to NRBRC:
iGive.com: When you purchase items at over 1,400 online stores, a percentage of your purchase will be donated to NCBRC. Stores include Macy’s, Melissa and Doug, Bed Bath & Beyond, Nike, Petsmart, and more. Shop and Give today!
-
HAVEN Act Guide
The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income.
This Guide provides an overview of the HAVEN Act identifies benefits that are excluded, and answers frequently asked questions.
-
Keep up with NCBRC
Thank you!
Thank you to the following organizations without whose support our work would not be possible.
American College of Bankruptcy
The American College of Bankruptcy is an honorary public service association of bankruptcy and insolvency professionals who are invited to join as Fellows based on a proven record of the highest standards of professionalism plus service to the profession and their communities. Together with its affiliated Foundation, the College is the largest financial supporter of bankruptcy and insolvency-related pro bono legal service programs in the United States.NACBA
The only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA has more than 3,000 members located in all 50 states and Puerto Rico.O. Max Gardner Foundation, Inc.
Visit NACBA.org
The O. Max Gardner Foundation, Inc. provides financial support to institutions devoted to charitable, scientific, literary or educational purposes. NCBRC has been a recipient of grant awards from the foundation.