Here is a question that sounds like it should have a simple answer: if you file a tax return late, can the tax on it be discharged in bankruptcy?
The honest answer is that federal courts disagree, sharply, and the answer can change depending on which state you live in. If you live in Florida, you are in the Eleventh Circuit, and that matters.
Why the word "return" decides everything
The Bankruptcy Code does not discharge a tax "with respect to which a return ... was not filed." 11 U.S.C. § 523(a)(1)(B)(i). If your late filing is not legally a "return," you are treated as if you never filed. No amount of waiting fixes that.
If your late filing is a return, you are under the two-year rule in § 523(a)(1)(B)(ii) instead: wait more than two years after filing, and pass the other tests, and the tax can be dischargeable. See the 2-year rule for late-filed returns.
So the whole fight is over one word.
The hanging paragraph
Before 2005, the Code did not define "return." Courts used a test from the Tax Court case Beard v. Commissioner, 82 T.C. 766 (1984). Under Beard, a document is a return if (1) it purports to be a return, (2) it is signed under penalty of perjury, (3) it contains enough data to calculate the tax, and (4) it represents an honest and reasonable attempt to satisfy the tax law.
The 2005 bankruptcy amendments added an unnumbered paragraph at the end of § 523(a), often called the "hanging paragraph." It says a "return" means "a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements)." It includes a return prepared under IRC § 6020(a) with your cooperation, and excludes a return the IRS makes on its own under IRC § 6020(b).
The fight is over three words in that parenthetical: "applicable filing requirements."
Approach 1: the one-day-late rule
Three federal appeals courts read "applicable filing requirements" to include the filing deadline. A return filed after the deadline does not meet the filing requirements, so it is not a return.
- In re McCoy, 666 F.3d 924 (5th Cir. 2012), involving a late Mississippi return.
- In re Mallo, 774 F.3d 1313 (10th Cir. 2014), which agreed with McCoy that the plain language excludes all late-filed forms except those prepared with the IRS under § 6020(a).
- Fahey v. Massachusetts Department of Revenue, 779 F.3d 1 (1st Cir. 2015), involving late Massachusetts returns, over a dissent.
Under this rule, filing one day late means the tax on that return is never dischargeable in a Chapter 7, except in the narrow § 6020(a) situation. That is a harsh result, and it is why the rule has drawn so much criticism.
Approach 2: Beard, with lateness counted against you
Most other circuits that have addressed late returns use the Beard test and ask whether the late filing was an "honest and reasonable" attempt to comply. Under that view, how late you filed, and why, is part of the answer.
This is Florida's approach. In In re Justice, 817 F.3d 738 (11th Cir. 2016), the Eleventh Circuit expressly did not decide whether the one-day-late rule is correct. It assumed for argument's sake that it is not, and still ruled for the IRS. The debtor had filed his returns years late, with no explanation, and only after the IRS issued notices of deficiency and assessed the tax. The court held that the entire period of the taxpayer's conduct counts, and that conduct was not an honest and reasonable effort to comply. The tax was not dischargeable.
The Third Circuit reached the same result on similar facts in In re Giacchi, 856 F.3d 244 (3d Cir. 2017).
Approach 3: look only at the form
The Eighth Circuit, in In re Colsen, 446 F.3d 836 (8th Cir. 2006), takes the most debtor-friendly view. It judges the honesty of the attempt from the face of the form itself, not from the timing. The Eleventh and Third Circuits both declined to follow it. If you live in Florida, Colsen is interesting reading and not much more.
What the IRS argues
You might expect the IRS to push the one-day-late rule everywhere. It does not. The Internal Revenue Manual (IRM 5.9.17.8.1) describes Chief Counsel Notice CC-2010-016, which sets out the IRS litigating position: not every tax on a late return is nondischargeable. In Justice, both the taxpayer and the IRS argued that the one-day-late rule was wrong.
The IRS position focuses on returns filed after the IRS has already assessed. When you file your own Form 1040 after a substitute for return assessment, the IRS says only the portion of tax not previously assessed can be discharged. If your return shows the same or less tax than the IRS assessed, the IRS position is that none of it is dischargeable. That situation gets its own page: IRS substitute for return years and bankruptcy.
What this means for a Florida filer
Nothing here is a guarantee, but the pattern in the cases is clear enough to act on:
- Late but voluntary is better than late after the IRS acts. A return you file before the IRS has prepared a substitute, sent a notice of deficiency, or assessed the tax is in a far stronger position under Justice.
- Reasons matter. Justice stressed that the debtor offered no excuse. Illness, a death in the family, or records you could not get are facts worth documenting.
- The two-year rule still applies. Even a late filing that counts as a return has to be more than two years old at the bankruptcy filing.
- Where you file matters. If you have moved recently, the circuit where you file bankruptcy can change the analysis.
Our firm has a longer piece on discharging late-filed taxes if you want more background. You can check the timing tests for each year with the discharge calculator, but remember the calculator cannot tell you whether a court will treat your filing as a return. That part takes judgment.
If you filed late, or you are about to, call me at (813) 229-7100 before you file bankruptcy. The order in which things happen can decide this issue, and some of those steps cannot be undone. Every case turns on its own transcripts and dates; this page is general information, not legal advice for your situation.