Taxes Owed as a Result of Late or Unfiled Returns May Be Non Dischargeable


Did you know that your income taxes for prior tax years could be dischargeable? Many clients are relieved to learn that this is possible and often times the IRS or state taxing authority will be willing to concede dischargeability of certain tax debt in your case. However, whether or not your taxes are dischargeable could also depend on whether you filed your taxes too late or failed to file them at all. If you are considering filing for bankruptcy and are concerned about tax debt in addition to other debts, you should make every effort to determine whether any of your taxes were filed late and without an extension and also whether or not the IRS or your state taxing authority filed a tax return for you for a particular year before you filed your return. If you are aware of these circumstances, make sure you inform your bankruptcy attorney because it could make a significant difference in his or her analysis of the dischargeablity of your tax debt.

A recent case, Shinn v, IRS (In re Shinn), has highlighted the problems faced by debtors who have filed their tax returns late and who wish to have their tax liabilities determined to be dischargeable. In this case, the debtor filed his tax returns for tax years 2001 and 2002 in 2006, several years after the IRS had already made its own determination of the debtor's tax liabilities for 2001 and 2002. It is important to note that this debtor had not asked for any extensions for these tax years and simply did not file tax returns. The court determined that untimely filed Form 1040s could not be considered a return for dischargeability purposes and no exception applied. Accordingly, the debtor was not entitled to a discharge of his tax debt for 2001 and 2002, which at the time exceeded $45,000.00.

If you are faced with tax liabilities and are seeking advice from bankruptcy counsel, make sure you come to your first meeting with that attorney with as much information as possible regarding the timing of your tax assessments in addition to the amount of taxes you owe. I always encourage potential clients to make our first meeting as productive as possible because the clearer the facts, the better analysis I can give a person regarding his or her case and how I may be able to help them.

Questions or interested in a consultation about your case? Email me at or call me at (914) 752-5098.

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