§ 42.7     Tax Return Duties—On Request
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 42.7, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Before exploring the consequences of failure to comply with the new tax return duties seven days1 and one day2 before the first scheduled meeting of creditors, there are other new tax return duties imposed by BAPCPA that are triggered by the request of a creditor, the trustee, the court or other party in interest. Some of these on-request new tax return duties have schedules that mirror the seven-day and one-day requirements discussed above. Others can arise by request at any time during the Chapter 13 case.

[2]

First there is the new duty, that the debtor provide to any timely requesting creditor the tax return or transcript that the debtor must provide to the trustee not later than seven days before the first date set for the meeting of creditors.3 This is the federal income tax return for the most recent tax year ending immediately before the Chapter 13 petition and for which a federal income tax return was filed. “Timely” has been defined by Interim Rule 4002(b)(4) as “at least 15 days before the first date set for the meeting of creditors.”4 The Interim Rules do not tell us what form the request must take. The Director’s Interim Guidance Regarding Tax Information under 11 U.S.C. § 521 issued by the Director of the Administrative Office of the United States Courts5 requires a request to be in writing and filed with the court.

[3]

Debtors have to be a little concerned about providing tax returns to creditors. The confidentiality issues are partially addressed in § 521(g)(2).6 The consequence of failing to provide a timely requested tax return is mandatory dismissal of the Chapter 13 case unless the debtor demonstrates circumstances beyond the control of the debtor.7

[4]

Interim Rule 4002(b)(4) requires the debtor to provide a timely requesting creditor with more tax return documents than BAPCPA requires in § 521(e)(2). The Interim Rule requires the debtor to provide a copy of the return, “including any attachments.”8 There is no requirement that the debtor provide attachments to tax returns in § 521(e)(2). Disjunctively, Interim Rule 4002(b)(4) instructs the debtor to “provide a written statement that the documentation does not exist.” The statute does not require a written statement when there is no filed tax return for the most recent tax year immediately preceding the Chapter 13 petition.

[5]

The duty to provide a timely requesting creditor a copy of the most recent filed tax return applies “at the same time” that the debtor provides the return or transcript to the trustee. This has to be not later than seven days before the first date set for the meeting of creditors and the duty is limited to the one return or transcript described in § 521(e)(2)(A)(i).9 It has been held that a creditor must make a request under § 521(e)(2)(A)(i) before seven days before the first date set for the meeting of creditors else the creditor will lack standing to complain about nonperformance.10

[6]

The new tax return filing duty in § 521(f) is not nearly so limited:

(f) At the request of the court, the United States trustee, or any party in interest in a case under chapter 7, 11, or 13, a debtor who is an individual shall file with the court—
(1) at the same time filed with the taxing authority, a copy of each Federal income tax return required under applicable law (or at the election of the debtor, a transcript of such tax return) with respect to each tax year of the debtor ending while the case is pending under such chapter;
(2) at the same time filed with the taxing authority, each Federal income tax return required under applicable law (or at the election of the debtor, a transcript of such tax return) that had not been filed with such authority as of the date of the commencement of the case and that was subsequently filed for any tax year of the debtor ending in the 3-year period ending on the date of the commencement of the case;
(3) a copy of each amendment to any Federal income tax return or transcript filed with the court under paragraph (1) or (2).11
[7]

Section 521(f)(1) addresses federal (only) income tax returns for tax years ending while a Chapter 13 case is pending. This provision applies if there is a “request” from the court, from the U.S. trustee or from a party in interest and then the debtor must file the return or transcript with the court. These conditions are in contrast to § 521(e)(2)(A)(ii), discussed immediately above,12 which states that on the timely request of a creditor the debtor must provide a copy or transcript of the most recent filed federal income tax return for the tax year ending immediately before the petition. Here, the request—timely or otherwise—triggers a duty to file the tax return or transcript; there is no requirement that the debtor provide a copy or transcript to the requesting party or anyone else.

[8]

The requirement that the copy or transcript be filed with the court “at the same time” filed with the taxing authority nullifies the option of filing a transcript. Transcripts are prepared internally by the IRS and typically are not available for weeks after the filing of a tax return.

[9]

Once again, neither the statute nor any Interim Rule defines the “request” that compels this new tax return filing requirement. That this request can come from “the court” adds the wrinkle that there might be more than one possible trigger for the new filing requirement—the court might “request” by local rule or general order; the U.S. trustee or a party in interest might file a motion consistent with the Interim Guidance issued by the Director of the Administrative Office of the United States Courts.13

[10]

The new requirement to file a copy of tax returns with the court applies to each tax year ending while the Chapter 13 case is pending. The section seems to contemplate a single request that is effective for all subsequent tax years while the Chapter 13 case is pending. There is no mention in § 521(f)(1) of non-federal tax returns. The many non-federal tax returns that must be filed with taxing authorities under § 1308 not later than the day before the first date set for the meeting of creditors14 are not subject to filing with the bankruptcy court under § 521(f).

[11]

Section 521(f)(2) adds the requirement to file with the court each required federal income tax return that had not been filed at the petition that is subsequently filed for a tax year ending in the three years before the petition. Remember that in a Chapter 13 case, § 1308 mandates that, not later than one day before the first date set for the meeting of creditors, the debtor shall file with appropriate taxing authorities all state or federal tax returns for all taxable years ending during the four-year period before the petition.15 With respect to three of those four years, if there was a required federal income tax return that was not filed at the petition, when it is filed with the taxing authority, the debtor must also file that federal income tax return with the bankruptcy court if requested by the court, the U.S. trustee or any party in interest. Once again, there will be no transcript available “at the same time” such a return is filed with the taxing authority. This new filing requirement applies upon request, applies only to federal income tax returns and then only for the three-year period before the petition.

[12]

In the example used above,16 in a Chapter 13 case filed on January 10, 2006, there was a federal income tax return required for 2005 that was not yet due to the IRS and not filed at the commencement of the case. At the request of the court, the U.S. trustee or any party in interest, when that 2005 federal income tax return was filed during the Chapter 13 case, § 521(f)(2) requires that a copy be filed with the bankruptcy court. Discussed above,17 that 2005 tax return may have to be filed with the taxing authority not later than the day before the first date set for the meeting of creditors or, at the latest, by the end of any additional reasonable period the trustee holds open the meeting of creditors.

[13]

If that 2005 return is filed seven days or more before the first date set for the meeting of creditors, the debtor may also be required by § 521(e)(2)(A) to provide a copy to the Chapter 13 trustee and to any creditor timely requesting a copy.18 This is Total Tax Return Overkill: the 2005 tax return will be filed with the IRS,19 filed with the bankruptcy court,20 provided to the Chapter 13 trustee21 and provided to any timely requesting creditor22—all at the same time. Four copies of the same tax return. If the 2005 return is filed between seven days and one day before the first date set for the meeting of creditors, then the return probably satisfies the mandate in § 1308(a), the debtor would not be required to provide the 2005 return to the trustee or to a timely requesting creditor but the debtor would be required at the same time the return was filed with the IRS to file a copy with the bankruptcy court if there was a request (timely or otherwise) from the court, the U.S. trustee or any party in interest. Maybe dizzy is the right word here.

[14]

A debtor coming into Chapter 13 missing four or more years of prepetition tax returns is required by § 1308(a) to file with the taxing authorities four years of tax returns no later than the day before the first date set for the meeting of creditors.23 When those four years of returns are filed with the taxing authorities, at the request of the court, the U.S. trustee or any party in interest, the debtor is required by § 521(f)(2) to file a copy of each return with the bankruptcy court but for only three prepetition tax years. It is anyone’s guess why § 1308(a) mandates filing four years of prepetition returns with taxing authorities but on proper request only three years of returns must be filed with the bankruptcy court under § 521(f)(2).

[15]

All of the prepetition returns that must be filed with the court on request under § 521(f)(2) are subject to inspection and copying by any party in interest under § 521(g)(2)—compounding confidentiality issues.24 Unlike the new tax return filing and providing duties in §§ 521(e)25 and 130826 there is no statutory consequence specified in § 521(f) if the debtor fails to file with the court the tax returns described in § 521(f)(1) and (2).27

[16]

Finally, § 521(f)(3) requires the Chapter 13 debtor at the request of the court, the U.S. trustee or any party in interest to file a copy of each amendment to any federal income tax return that is filed with the court under § 521(f)(1) or (2). This additional requirement is not worded the same as the requirements to which it refers. The predicate “at the same time filed with the taxing authority” is missing with respect to the filing of a copy of each amendment to a federal income tax return filed with the court under § 521(f)(1) or (2). Even if a subsequent time is allowable, there is no provision for the filing of a transcript of an amendment. The reference to an amendment to a transcript in § 521(f)(3) is nonsense, given that it is impossible to file a transcript of a federal income tax return “at the same time” that the return itself is filed with the IRS.


 

1  See § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

2  See § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

3  11 U.S.C. § 521(e)(2)(A)(ii). See § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

4  Interim Bankr. R. 4002(b)(4), discussed in § 400.1 [ New Debtor Duties at the Meeting of Creditors ] § 43.2  Debtor Duties at Meeting of Creditors after BAPCPA.

 

5  See App. HH and § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

6  11 U.S.C. § 521(g)(2) is discussed in § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

7  11 U.S.C. § 521(e)(2)(B) and (C), discussed in § 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns.

 

8  Interim Bankr. R. 4002(b)(4).

 

9  11 U.S.C. § 521(e)(2)(A)(i) is discussed in § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

10  In re Ring, 341 B.R. 387, 390 (Bankr. D. Me. 2006) (“In order to be aggrieved, the creditor must have made a request to be provided the return ‘at the same time’ they are provided to the trustee. . . . As that request must have been ‘timely’ made, . . . it must have been made in time for the debtor to provide the return to the creditor ‘no later than’ seven days before the § 341 meeting.”).

 

11  11 U.S.C. § 521(f).

 

12  See above in this section, and see § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

13  See § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

14  See 11 U.S.C. § 1308(a), discussed in § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

15  See 11 U.S.C. § 1308(a), discussed in § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

16  See §§ 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors and 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

17  See § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

18  See 11 U.S.C. § 521(e)(2)(A)(i) and (ii).

 

19  See 11 U.S.C. § 1308(a), discussed in § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

20  See 11 U.S.C. § 521(f)(1), discussed in § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

21  See 11 U.S.C. § 521(e)(2)(A)(i), discussed in § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

22  See 11 U.S.C. § 521(e)(2)(A)(ii), discussed in § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

23  See § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

24  See 11 U.S.C. § 521(g), discussed in § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

25  See 11 U.S.C. § 521(e), discussed in §§ 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors and 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

26  See 11 U.S.C. § 1308, discussed in § 391.1 [ Tax Return Duties One Day before First Scheduled Meeting of Creditors ] § 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors.

 

27  See § 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns for further discussion of this omission.