Substitutes for Return & Non-Dischargeability:
The Ninth Circuit Adds Substitute for Return Assessments to Tax Evasion and Fraudulent Returns as Reasons for Non-dischargeable Tax Obligations.

By Christopher N. Coyle[1]

            The Internal Revenue Service’s 2010 policy that substitute for return (“SFR”) assessments can never be dischargeable in bankruptcy has firmly taken hold in the Ninth Circuit with the recent decision In re Smith.[2]  With this Ninth Circuit decision, the IRS has succeeded in having most or all SFR assessments join the other “never dischargeable” income taxes: fraudulent return liabilities and willful attempts to evade liabilities.  The difference in this new category is that the affected taxpayers merely failed to file their returns, but otherwise committed no wrongs.  This article will discuss the Smith decision along with the effects of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005’s (“BAPCPA”) hanging paragraph and concludes in joining Professor Timothy M. Todd in advocating for a legislative or judicial solution to this “draconian and unduly punitive” result.[3] Continue reading Substitutes for Return & Non-Dischargeability →