The 240-day rule is the one people forget, because most of the time it is already satisfied. Then an audit, an amended return, or a late assessment shows up, and it is the only rule that matters.
What the 240-day rule says
11 U.S.C. § 507(a)(8)(A)(ii) gives priority to an income tax "assessed within 240 days before the date of the filing of the petition." Because § 523(a)(1)(A) excepts priority taxes under § 507(a)(8) from discharge, a tax assessed inside that window survives the bankruptcy.
Two things set this rule apart from the others:
- It runs from the assessment date, not the due date and not the date you filed.
- It applies assessment by assessment. One tax year can have several assessments, and each one gets its own 240-day clock.
What an assessment is
An assessment is the IRS formally recording a tax liability on its books. Owing a tax and having it assessed are not the same thing. The debt exists because the law imposes it; the assessment is the bookkeeping step that lets the IRS collect.
Common ways a tax gets assessed:
- Your original return. When you file, the IRS assesses the tax you reported, usually shortly after processing.
- An audit. If an examination increases your tax, the additional amount is assessed later, often years after the return was filed. That new assessment starts its own 240-day clock.
- An amended return. If you amend and report more tax, the increase is assessed when the IRS processes it. See amended returns and audit assessments.
- A substitute for return. When the IRS prepares a return for you under IRC § 6020(b), it generally sends a notice of deficiency (IRC § 6212), waits out the 90-day window to petition the Tax Court (IRC § 6213(a)), and then assesses.
Why it usually does not matter, until it does
Think about the typical timelines.
If you filed on time, your tax was assessed within weeks or months of filing. By the time three years have passed from the due date, 240 days from that assessment are long gone. The three-year rule is the one doing the work.
If you filed late, the two-year rule usually runs longer than 240 days from the assessment that followed your return. The two-year rule is doing the work.
The 240-day rule becomes the deciding rule when an assessment lands late in the story: an audit finishes, an amended return gets processed, or the IRS assesses an old year after a long delay. Then the year can pass the three-year and two-year rules and still fail here.
An example
Suppose you filed your 2019 return on time and paid what you reported. Later, an audit adds more tax, and the IRS assesses the additional amount on March 1, 2026. You file Chapter 7 on August 1, 2026.
- The 2019 return was due more than three years before the bankruptcy. The three-year rule is satisfied.
- The return was timely, so the two-year rule does not apply.
- The audit assessment was made 153 days before the filing. It fails the 240-day rule and survives the discharge.
Waiting until after late October 2026 would have changed the result for that assessment. Same tax year, same debt, different answer, all because of the date the IRS posted the audit increase.
Taxes not assessed yet
You cannot dodge the 240-day rule by filing before the IRS gets around to assessing. Section 507(a)(8)(A)(iii) separately gives priority to an income tax "not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case." An audit in progress at filing is the classic example. The details are in unassessed but assessable taxes.
What stops the 240-day clock
The 240 days do not always run straight. The statute excludes:
- An offer in compromise. Any time during which an offer in compromise on that tax was pending or in effect during the 240-day period, plus 30 days (§ 507(a)(8)(A)(ii)(I)).
- A prior bankruptcy. Any time during which a stay of collection was in effect in a prior bankruptcy case during the 240-day period, plus 90 days (§ 507(a)(8)(A)(ii)(II)).
- Collection due process hearings and confirmed plans. The paragraph at the end of § 507(a)(8) also suspends these periods while the IRS was barred from collecting because you requested a hearing and appeal of a collection action, plus 90 days, and while a confirmed bankruptcy plan blocked collection, plus 90 days.
The offer-in-compromise exclusion catches people who submit an offer, get rejected, and then file bankruptcy. The offer was pending, so the clock was paused. In Young v. United States, 535 U.S. 43 (2002), the Supreme Court held that the three-year lookback period is tolled while a prior bankruptcy case is pending, and it rejected the argument that this express offer-in-compromise tolling provision meant Congress did not want the three-year period tolled, explaining that the provision supplements rather than displaces equitable tolling. More on tolling in how prior bankruptcies, offers and CDP hearings stretch the lookback periods.
Finding your assessment dates
Your IRS account transcript lists each assessment for a tax year with its own date: the original assessment when the return was processed and any additional assessments after that. Request transcripts for every year you owe through your IRS online account or with Form 4506-T.
Write down every assessment date, not just the first one. Then mark the date 240 days after the latest one for each year, and add any excluded periods. If you have had an offer pending, a collection appeal, or a prior bankruptcy, the real date can be months later than the simple count.
The bankruptcy discharge calculator runs the 240-day test along with the 3-year and 2-year rules. If you want the broader picture of how bankruptcy fits a tax problem, our firm's overview of bankruptcy for tax problems is a good starting point.
If you are inside the 240 days
You have a few choices. You can wait, if the IRS is not actively levying and waiting is realistic. You can file Chapter 13, where a priority tax is paid in full through the plan under 11 U.S.C. § 1322(a)(2) but you get time and protection from collection. Or you can address the tax outside of bankruptcy for now. Which one makes sense depends on how much you owe, what the IRS is doing, and how close you are to the line.
If an audit or late assessment is standing between you and a discharge, call me at (813) 229-7100 and let's look at the actual dates. Every case turns on its own transcripts and dates; this page is general information, not legal advice for your situation.