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The Law Office of Irina N. Goldberg is a Boutique tax law practice focusing on IRS and California civil tax and criminal tax controversy disputes. Our mission is to provide taxpayers with affordable and personalized assistance in dealing with aggressive federal and state taxing agencies. Call (760) 815-6220 or email to schedule your free consultation

Wednesday, July 17, 2013

10th Circuit BAP Ruled That You Cannot Discharge Your Tax Debt In Bankruptcy If You Filed Your Tax Return Post-Assessment

If you intend to discharge your tax debt in bankruptcy, there is an important holding that you should be aware of. If you file your tax return after the IRS has already prepared a substitute return (SFR) on your behalf, your form 1040 does not qualify as a tax return for purposes of bankruptcy.

An SFR is based entirely on information that the IRS received about you from third parties (i.e. your employer). Therefore, the SFR does not include any additional exemptions or expenses that you are entitled to and will therefore overstate your tax liability. 

This holding came out of last year's US Bankruptcy Appellate Panel (BAP) 10th circuit case Wogoman vs. IRS. The Wogomans did not file their 2001 tax return by the IRS deadline. In 2004, the IRS began the SFR process and sent the Wogomans a notice of deficiency notifying them of their right to challenge the deficiency in Tax Court within 90 days. The 90 days passed and on February 21, 2005 the IRS assessed the Wogomans for 2001. The Wogomans filed their correct 1040 for 2001 on August 1, 2006. In response, the IRS adjusted the Wogomans' liability and penalties to reflect the amounts on their filed 1040.

Subsequently, the Wogomans filed for bankruptcy attempting to discharge their tax debt. 

In deciding this case, the BAP relied on 11 USC 523 (a)(1)(B)(i) which states that a tax debt cannot be discharged in bankruptcy if the tax return, upon which it is based, was not filed. The BAP determined that a return filed after assessment did not qualify as a tax return filed under section 523. The BAP reasoned that "as a matter of law, a Form 1040 is not a return if it no longer serves any tax purpose or has any effect under the IRC." Since the IRS had already assessed the Wogomans with the SFR, their return filed after the fact no longer qualified as an honest attempt to satisfy their obligation to file a tax return.

This content is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional. 


  1. This is generally NOT true in the 8th Circuit. And I thought that the IRS had agreed to to non dischargeability cases in situations similar to Wogomon in the future.

  2. The Wogomans can find relief with the Collection Statute Expiration Date (CSED). Under federal law the IRS can no longer enforce collection of a tax debt 10 years after the date of assessment. So, in this case, the tax debt drops off the IRS books on February 21, 2015, 17 months from now. This can be a better alternative to bankruptcy for old tax debt.

    Mike Craig, CPA
    Laguna Niguel, CA

  3. Irina --- I've seen it done. IRS Insolvency may allow SFRs to be discharged. There are myriad unofficial rules, the insolvency unit loves to have discretion. I've seen tax debts discharged where there was clear fraud. I've seen liens released simply because we asked. I would adjust your language to "may not" from "does not."

    Otherwise, a great blog and an important reminded to ALWAYS FILE YOUR TAX RETURNS!

    Anthony E. Parent, Esq.

  4. Several comments. First, it is my understanding that even if the underlying tax on an SFR assessment is not dischargable, the penalties should be. Second, the Service always has the option of reducing the liability to judgment before the 10 year CSED expires. That will extend the time for collection. In my experience, however, they take this step infrequently. Lastly, it is important to remember the types of actions that can suspend (there therefore extend) the 10-year CSED - such as the filing of bankruptcy, an OIC and/or a CDP request for a hearing. This is a great blog, and Anthony's reminder about ALWAYS filing a return - BEFORE the IRS files one for the taxpayer - is absolutely on the mark.

  5. Hasn't the IRS just been SHUT DOWN by the 10th Circuit Appeals Court #07-2017, Sept 1st, 2013 < > ? DOJ defaulted in showing that congress has acted to provide for specific tax liability--because there is none. Congress cannot delegate its power of Statute-at-Large, heretofore, and by constructive fraud, imposed by IRC subtitle A. Again, an administrative regulation is NOT an "Act of Congress". The IRS is not even a de jure service or bureau within the U.S. Dept of the Treasury, even so they would STILL not have any authority to create a tax liability by means of regulations even published in the Federal Register. These are criminal and civil violations: impersonating the Congress & the U.S. Dept. of the Treasury (18 USC 912 & 31 USC 333, respectively). Even if the specific liability law could be found, DOJ & Treasury are now in equitable & collateral estoppel (DOJ attempted to appear on behalf of a Delaware corporation which has been revoked). 300 million US citizens are free with claims w/o statute of limitations on the fraud. With the estoppels, how would Justice Sotomayor even properly hand up jurisdiction on this mess? In the 10th Circuit: It is now the OFFICIAL position of the United States that there is no federal Statute-at-Large which creates a specific liability for income taxes imposed by subtitle A of the Internal Revenue Code.

  6. Really find interesting to read.. Thanks for Sharing..

  7. Thanks for a nice article. Bankruptcy is a very long time-consuming process. I would recommend to use data rooms to store the information.