Taxes shown on IRS-prepared late returns (returns prepared with only the second party information sent to the IRS; 1099’s,, 1098’s W-2’s) will not be discharged in bankruptcy, a court says.
When a couple fails to file tax returns, the Service audited them and assessed taxes against them based on substitute returns the agency prepared. The couple later filed for bankruptcy and claimed the tax bill (based upon the IRS calculations) should be wiped out.
The court disagreed and refused to extinguish their tax liability (Cannon, D.C., Ga.).