Debtor Can’t Wipe Out Tax Debt From Late Filed Returns

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By Daniel Gill

A man who didn’t file tax returns until after the Internal Revenue Service made assessments against him won’t have his tax debts wiped out in bankruptcy, the U.S. Court of Appeals for the Third Circuit ruled May 5 ( Giacchi v. United States (In re Giacchi) , 2017 BL 150659, 3d Cir., No. 15-3761, 5/5/17 ).

The opinion by Judge Jane R. Roth addressed a question of first impression before the court: whether late filed tax returns constitute “returns” under the Bankruptcy Code.

Several circuits have employed a “one-day-late rule”—if the tax return is one day late, it isn’t a return under the code, and the debt can’t be discharged under 11 U.S.C. §523(a)(1)(B)(i). But the court here declined to decide whether the one day rule is correct.

Instead it joined with those circuits that follow Beard v. Commissioner of Internal Revenue, under which discharge is permitted when the purported tax returns “represent an honest and reasonable attempt to satisfy the requirements of the tax law.”

Here, however, once the IRS had assessed the taxpayer’s liability, subsequent filing of the returns could no longer “serve the tax return’s purpose, and thus could not be an honest and reasonable attempt to comply with the tax law,” the court said.

Thomas Giacchi didn’t file tax returns on time for 2000, 2001 and 2002. He filed returns only after the IRS assessed liability on him for those years.

Giacchi filed a Chapter 7 case in 2010 and a Chapter 13 case in 2012. In the latter case, he sought a determination that the liability for the three tax years was discharged in his 2010 Chapter 7 case.

Circuit Judges D. Michael Fisher and Joseph A. Greenaway Jr. joined in the decision.

David F. Dunn, Allentown Pa., represented Giacchi. The IRS was represented by Julie C. Avetta in Washington.

To contact the reporter on this story: Daniel Gill in Washington at

To contact the editor responsible for this story: Jay Horowitz at

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