John Paul Salvador v. United States

The Bankruptcy Code provides that an individual debtor’s unpaid tax debts are dischargeable so long as they meet certain requirements. For older tax debts, one of those requirements is that the debtor have filed a “return” for each of the tax years in which the debts were incurred. Because many tax returns are filed after the dates on which they are due, the question whether a latefiled Form 1040 income tax return is a “return” is an important one that affects numerous debtors seeking a fresh start under the Bankruptcy Code each year. Due to a three-way circuit split, whether a debtor’s late-filed Form 1040 is a “return” depends on where the debtor lives. Three circuits hold that, even if the IRS accepts it as a tax return, a Form 1040 is not a “return” if it has any filing defects—meaning it is not a “return” if it is filed even one day late. Six circuits generally hold that a late but otherwise correctly filed Form 1040 is not a “return” if the IRS has already assessed the filer’s tax liability for the tax year for which it is filed, because in the courts’ view a Form 1040 filed so late does not represent an honest and reasonable attempt to satisfy the tax laws. One circuit, by contrast, has held that a late but otherwise correctly filed Form 1040 can be a “return,” even if filed after assessment, so long as the form, on its face, evinces an honest and reasonable attempt to satisfy the tax laws. The IRS, for its part, agrees with petitioner that late-filed returns are “returns” but takes the position that postassessment tax debts are generally nondischargeable based on an entirely different theory that has been rejected by virtually every court to consider it. The question presented is: Whether a late but otherwise correctly filed Form 1040 is a “return” for purposes of § 523(a) of the Bankruptcy Code. (i)