Timing Is Everything

11 U.S.C. Section 523(a)(1)(A) excepts from discharge under 11 U.S.C. Section 727 any tax liability that would be classified as a priority tax under 11 U.S.C. section 507(a)(8). Section 507(a)(8) states that a priority tax claim involves any tax liability for a tax year in which the tax return, "including extensions" is due within three years before the filing of the bankruptcy petition. The case of Dippel v. U.S, (Bankruptcy Ct. S.D.Fla., March 23, 2005), demonstrates that the early bird does not necessarily get the worm.

In 2001, the Dippels filed for an automatic extension to file their income tax return for 2000, extending the filing deadline within which they could file a timely return to August 15, 2001. They actually filed a return on April 22, 2001, but the Service marked it as being filed on or before April 15, 2001. They filed a Chapter 7 bankruptcy on June 15, 2004, more than 3 years after their 2000 return was filed, but less that 3 years after the due date, with extensions, for the filing of the return.

The court rejected the request for discharge, noting the unanimity of other courts that taxpayers cannot nullify their previously filed requests for extension. One cannot tell from the facts recited in the opinion whether the taxpayers had any ability to defer their bankruptcy filing by 61 days, but if they could have, they clearly should have.