If You Have to Amend Your Tax Return, are the Taxes Dischargeable in Bankruptcy?

In my last blog article, I explained that taxes are dischargeable in bankruptcy if they meet the following requirements:

1. The taxes were due more than 3 years ago,
2. They were filed more than 2 years ago,
3. They were assessed more than 240 days ago,
4. They were filed in good faith and absent of any fraud, and
5. They were income taxes, not payroll taxes.

But, what happens if you have to file an amended tax return?

Filing an Amended Tax Return After Bankruptcy

Everyone makes mistakes sometimes.  That is only human and thus you should be allowed to correct those mistakes if possible.  If you amend your tax return and you still owe the taxing authorities such as the Internal Revenue Service (IRS) or the Alabama Department of Revenue, how does this affect the dischargeability of the taxes owed if you subsequently file for bankruptcy protection?

If you amend your tax return you may be relieved to know that the amendment of your tax return does not change the filing date of the original return. Your tax return will still be considered to have been filed the first time you filed the tax return.

For example, you filed your 2009 tax return when they were originally due on April 15, 2010.  The IRS subsequently contacts you in 2014 to notify you that you made a mistake on your 2009 return and that you now need to amend that return. You in turn go back to your accountant and they help you file the amended 2009 tax return on June 15, 2014. You then file for bankruptcy protection on July 1, 2014.  So after reviewing the above checklist you deduce that the 2009 tax debt should still be dischargeable because you filed the original tax return in good faith, absent any fraud, on income taxes that were originally filed more than 2 years prior to your bankruptcy filing and assessed way over 240 days ago.  Your deduction would be correct if the amended amount was equal to or less than the original amount owed.

Owing Additional Taxes After Amendment

What if you owed additional taxes?  You must note is that if there are additional taxes assessed due to the amended tax return, those additional taxes will be subject to the 240 day assessment rule.

Using the above example dates, you initially owed $3,500.00 when you filed your 2009 tax return on April 15, 2010.  When you amended your tax returns on June 15, 2014, an additional $1,500 was assessed on June 30, 2014.  If you filed for bankruptcy on July 1, 2009, the original $3,500.00 tax debt would still be dischargeable. The additional $1,500.00 in taxes that were just assessed would unfortunately not be dischargeable, yet.

The reason I say yet, is because if you were to call and set up an appointment to see one of our Bond & Botes bankruptcy attorneys conveniently located in Alabama, Tennessee and Mississippi, we would analyze your entire financial situation and if at all possible advise you to wait the 240 additional days to file your bankruptcy case to February 26, 2015 or later, so that the entire $5,000.00 would be dischargeable.

 

Taxes are not going to decrease anytime soon and tax laws are very complicated. Bankruptcy laws are likewise extremely complicated.  When you combine the two laws, it becomes substantially more complicated, so please if you owe any tax debt of any kind and are wondering how to deal with it, call one of our Bond & Botes affiliated offices.  We offer free initial consultations so feel free to call one of our conveniently located offices to set up a private consultation with one of our experienced attorneys.  We will analyze your situation and help you to make the best decisions possible to help you eliminate your tax debt.

 

Related Tax Articles

• Can You Keep Your Tax Return After Filing Bankruptcy
• Can You Be Taxed For Debt Discharged in Bankruptcy?
• Filing a Tax Return If You Can't Pay