Discharge of Tax Debts when your return is filed late -- In re McCoy

Discharge of Tax Debts when your return is filed late.

Generally, income tax debts become dischargeable in bankruptcy if your tax has been past due for at least three years, the return was actually filed, and there has been at least 2 years since any assessment. It should be noted some events, such as filing an extension to file a return or filing an offer in comprise might increase these lengths of time.

Recently the 5th Circuit Court of appeals held in In re McCoy (--- F. 3d ---, 2012 WL 19376) that a late return is not a return at all. This may mean that if you do not timely file an income tax return you will never be able discharge a income tax debt.

The good news is Massachusetts is not in the 5th Circuit and will not have to follow this rule. However, this does not mean Massachusetts will not adopt this rule at some point in the future.

Therefore, it is advisable to always file your returns on time or other risk never being able to discahge the debt in bankruptcy, not to mention other issues that come from not filing.

If you are face income tax debt or other debt related issues please call us to discuss your. Massachusetts Bankruptcy lawyers 508-926-8833.