A lot of people who owe the IRS also have a few years they never filed. That is not a moral failing, but it is a bankruptcy problem. Chapter 13 has a specific rule for it, and the rule has teeth.

What section 1308 requires

Under 11 U.S.C. § 1308(a), if you were required to file a tax return under nonbankruptcy law, you must file all returns for taxable periods ending during the four years before your petition date. The deadline is the day before the date first set for the meeting of creditors under § 341(a). The returns go to the appropriate tax authorities, meaning the IRS and any state or local agency that requires a return.

The IRS reads the rule the same way. Its manual states that the debtor must file returns for periods ending during the four-year period before the petition no later than the day before the 341 meeting is first scheduled, and that at least seven days before the meeting the debtor must give the trustee a copy or transcript of the return for the most recent tax year (IRM 5.17.11, Chapter 13 Bankruptcy (Individuals with Regular Income) and Chapter 12 Bankruptcy (Family Farmers or Fishermen with Regular Income), citing 11 U.S.C. § 521(e)(2) and § 1308(a)).

Four years is the window. Older unfiled years are not covered by § 1308, but that does not make them disappear. The IRS can still file a claim for them, and they carry their own discharge problems discussed below.

If you cannot finish in time

Section 1308(b) builds in limited extensions:

  • The trustee can hold the meeting open. If the returns are not filed by the meeting, the trustee may hold the meeting open for a reasonable period. For returns already past due when you filed, that period can run no later than 120 days after the meeting. For returns not yet past due, it can run to the later of 120 days after the meeting or the due date under the last automatic extension you timely obtained.
  • The court can add a little more. After notice and a hearing, the court may extend the deadline further if you prove, by a preponderance of the evidence, that the failure to file is due to circumstances beyond your control. For past-due returns, that extension is capped at 30 days.

"My accountant is slow" is not usually a circumstance beyond your control. Plan as if there is no extension.

The penalty: section 1307(e)

If you do not file a return required by § 1308, then on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall dismiss the case or convert it to Chapter 7, whichever is in the best interest of creditors and the estate. That is 11 U.S.C. § 1307(e). The word is "shall," not "may."

The rule also blocks confirmation. Under 11 U.S.C. § 1325(a)(9), the court can confirm a plan only if you have filed all applicable federal, state, and local tax returns as required by § 1308. No returns, no plan.

Dismissal is bad. Conversion can be worse, because a Chapter 7 trustee may sell nonexempt property you filed Chapter 13 to protect. Read what a dismissed bankruptcy does to your tax debt before you treat this deadline as a suggestion.

Returns filed during the case reset the IRS claim deadline

Normally a governmental unit must file its proof of claim within 180 days after the order for relief. Section 502(b)(9) adds a special rule: for a tax tied to a return filed under § 1308, the claim is timely if filed within 60 days after that return is filed. In other words, filing late returns during the case gives the IRS a fresh window to claim the tax they show. That is fair, and it is also why the plan should be built around the real numbers on those returns, not a guess.

An SFR satisfies 1308, but not the discharge rules

This is the trap. Section 1308(c) says that for purposes of § 1308, a "return" includes one prepared under IRC § 6020(a) or (b), or a similar state or local law. Section 6020(b) is the provision the IRS uses to prepare a substitute for return when you do not file. So an IRS substitute for return can count toward the § 1308 filing requirement.

The discharge rules point the other way. The hanging paragraph at the end of 11 U.S.C. § 523(a) defines "return" for discharge purposes and expressly excludes a return made under § 6020(b). Taxes for a year in which you never filed (or filed late, within the two years before bankruptcy) are excepted from discharge under § 523(a)(1)(B), and § 1328(a)(2) carries that exception into the Chapter 13 discharge.

So a year where the only "return" is an IRS substitute may keep your Chapter 13 case alive and still survive your Chapter 13 discharge. In the Eleventh Circuit, which includes Florida, a late-filed return after an SFR assessment is its own fight. See SFR years and bankruptcy and are late-filed tax returns dischargeable.

Warning: Filing your own return is usually better than letting an SFR stand, both for the amount owed and for discharge. An SFR is the IRS's version of your taxes, and it was not written with your deductions in mind.

Keep filing after the petition, too

Section 1308 deals with the past. You are also expected to file and pay on time while the case is open. The IRS manual notes that in cases of serious post-petition noncompliance, the IRS may request dismissal or conversion when the debtor does not file required post-petition returns or obtain an extension, citing 11 U.S.C. § 521(j) and § 1307(e) (IRM 5.17.11). A five-year plan means five more filing seasons where a missed return can end the case.

A practical order of operations

  1. Pull your IRS account and wage and income transcripts for every year you may not have filed.
  2. Figure out which years fall within the four-year § 1308 window from your likely filing date.
  3. Prepare and file those returns, ideally before the petition, so the numbers in your plan are real.
  4. Check whether any year is under an SFR assessment and decide whether to file an original return for it.
  5. Run the filed years through the discharge calculator to see what the timing rules do with them, remembering that the two-year clock runs from the date your return is filed.

If you have not filed in a long time and are just starting to dig out, read I haven't filed in years, now what, and the guide to unfiled tax returns. The bankruptcy and the late returns should be planned together, not one after the other by accident.

File the returns, then file the case

Unfiled returns can sink a Chapter 13 before it starts. Call Darrin T. Mish, tax attorney, at (813) 229-7100 to sort out which years must be filed and in what order. Every case turns on its own transcripts and dates; this page is general information, not legal advice for your situation. The deadline is the day before your 341 meeting, and it shows up faster than you think.