One of the bedrock pieces of the discharge of taxes in in bankruptcy is the requirement to have filed a return. No return, no discharge of that year's taxes. But it gets more nuanced: in California when the feds audit the debtor and change any of the elemental figures in a filed return return, the taxpayer has an obligation to report the change to the Franchise Tax Board. If an amended federal tax return is filed, an amended state tax return must be filed within 6 months. Pre BAPCPA, the 9th Cir. BAP held in Jerauld, 208 B.R. 183, that the state law requirement to file a notice of the audit changes with the FTB was not a requirement to file a "return". Ms. Jerauld's failure to notify the FTB of the audit changes did not exclude the increased state taxes from discharge. The Jerauld opinion did not address the issue of how long the state taxes remained assessable, and therefore non dischargeable under § 523(a)(2 ). Then comes bankruptcy "reform" Consistent with most … [Continue reading...]
