Bankruptcy Mastery

Becoming a better bankruptcy lawyer

  • Home
  • About Cathy
  • Contact Cathy
  • Articles by Topic
    • Attorneys fees
    • Bankruptcy Practice
    • Before filing
    • Business bankruptcy
    • Cases new & significant
    • Counseling clients
    • Family Law in Bankruptcy
    • Means test
    • Opinionated
    • Real property
    • Rule 3002.1
    • Tax
  • Table of Contents
  • Start Here

Bankruptcy’s 3 Year Rule for Taxes

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice, Start Here

Taxes are dischargeable in bankruptcy once they meet the 3 year rule.  Don’t get swept away on April 16th and file a bankruptcy designed to discharge taxes without knowing whether the client got an extension to file for the year on the bubble.

The three year rule, found in §507(a)(8), starts counting from the day the return was last due without penalty.  If the client got an extension, the return was last due on the last day of the extension.

So, looking at tax year 2006, if there was no extension, you start counting on April 16, 2007, when the return was normally due. If the client got the maximum extension, you don’t start counting until Oct. 15, 2007.

It doesn’t matter if the return was actually filed prior to the expiration of the extension.  For the purposes of bankruptcy, you count from the last day of the extension.

And I repeat, don’t take your client’s word for whether they got an extension, if there is more than $1.50 in question.  Get a tax transcript so you are working from the same information the IRS has.

More from my site

  • The Mystery Of The Disappearing Means Test DeductionThe Mystery Of The Disappearing Means Test Deduction
  • Who Wants To Get Paid?Who Wants To Get Paid?
  • Mortgage Matters In Times Of COVID-19Mortgage Matters In Times Of COVID-19
  • Getting the Most from the Means TestGetting the Most from the Means Test
  • They’re Changing the Rules On UsThey’re Changing the Rules On Us
  • When Chapter 13 Debtors Run AmokWhen Chapter 13 Debtors Run Amok

Filed Under: Bankruptcy Practice, Start Here Tagged With: bankruptcy filing, discharge taxes

[footer_backtotop]

Copyright © 2023 ·Prose · Genesis Framework by StudioPress · WordPress

Theme customization by Rowboat Media LLC