The 3-Year Rule — § 507(a)(8)(A)(i)

The 3-year rule is the first of the three timing tests for tax dischargeability. The tax return for the year must have been due (including extensions) more than 3 years before the bankruptcy filing.

How the rule works

For each tax year, identify:

1. The original due date for the return (typically April 15 of the following year)
2. Any extension granted (October 15 with extension)
3. The actual due date including extensions

The tax is potentially dischargeable only if the bankruptcy is filed more than 3 years after that due date.

Worked example

Debtor owes 2020 tax year. Original due date: April 15, 2021. No extension filed. Three years later: April 15, 2024. The tax is potentially dischargeable in any bankruptcy filed after April 15, 2024 (subject to other rules).

If extension was filed: due date becomes October 15, 2021. The 3-year mark becomes October 15, 2024. Bankruptcy filed before October 15, 2024 cannot discharge the 2020 tax.

Tolling events

Several events toll (pause) the 3-year clock under § 507(a)(8)(A)(i):

• Prior bankruptcy filing: if the debtor filed bankruptcy and then dismissed before the 3-year clock ran, the time the prior case was pending tolls the clock plus 90 days
• Offer in compromise pending: while an OIC is pending, the clock is tolled
• Collection due process (CDP) hearing: while a CDP hearing is pending
• Other tolling under specific IRS proceedings

Common pitfalls

• Forgetting that the rule uses the due date INCLUDING extensions, not the original April 15 date
• Not accounting for tolling from prior bankruptcies
• Confusing "3 years from filing" (the rule) with "3 years from due" or "3 years from assessment" (different)

Why this rule exists

The 3-year rule reflects Congress's view that fresh tax debt shouldn't be eligible for bankruptcy discharge. Recent unpaid taxes are typically the result of recent income decisions; older unpaid taxes more often represent genuine financial difficulty. The 3-year period gives the IRS time to assess and collect before bankruptcy becomes available.