The 240-day rule is the second timing test for tax dischargeability. The tax must have been assessed more than 240 days before the bankruptcy filing.
"Assessment" is the IRS's formal recording of a tax liability. For most taxes, assessment occurs:
The 240-day clock starts on the assessment date. If bankruptcy is filed within 240 days of assessment, the tax is non-dischargeable as priority debt.
The 240-day rule prevents debtors from filing bankruptcy immediately after an audit assessment to escape recently-assessed liability. The 240 days gives the IRS time to begin collection.
Several events toll the 240-day period:
Debtor's 2018 tax was originally assessed February 2020 (when they filed the late 2018 return). The 3-year rule was satisfied by April 2022 (3 years from due date October 15, 2019 with extension). The 240-day rule was satisfied 240 days after February 2020, i.e., October 2020. Both rules satisfied; bankruptcy filed any time after April 2022 can discharge the 2018 tax (if the return-filing rule and no-fraud rule are also satisfied).
Now suppose IRS audited and assessed additional 2018 tax in March 2024. The additional assessment has its own 240-day clock starting March 2024. Bankruptcy filed in October 2024 (7 months later) would NOT discharge the additional assessment because 240 days haven't run from that assessment.
The original assessment is dischargeable; the post-audit additional assessment is not, despite both being "2018 tax."
Recent IRS audits or examinations can effectively reset the dischargeability clock for the additional tax assessed. Even if the underlying tax year is older than 3 years, fresh assessment within 240 days makes the additional amount non-dischargeable until 240 days run.