The third dischargeability rule: the debtor must have actually filed a return (not just had the IRS prepare a substitute-for-return), and that return must have been filed more than 2 years before the bankruptcy filing.
The rule's two components
Under § 523(a)(1)(B), tax debt is non-dischargeable if:
(B)(i) The return was not filed, OR
(B)(ii) The return was filed less than 2 years before the bankruptcy filing
The "filed return" requirement
The return must be a return prepared and signed by the taxpayer. An IRS-prepared substitute for return (SFR) under § 6020(b) does NOT count for this purpose under most circuit-level interpretations. The taxpayer must have actually filed.
If the IRS assessed via SFR and the taxpayer never filed a return, the tax is non-dischargeable indefinitely (as long as the return remains unfiled).
Late returns and the One-Day-Rule problem
The most contentious issue: what if the taxpayer filed a late return after the IRS had already assessed via SFR?
Several circuit positions have emerged:
The "one-day-rule": any late filing (even one day late) makes the return ineligible to be a "return" for § 523(a)(1)(B) purposes. The 5th, 10th, and 11th Circuits adopted this position.
The Beard test: a return filed late is still a "return" if it (1) purports to be a return, (2) is executed under penalties of perjury, (3) contains sufficient data to permit calculation of tax, and (4) represents an honest and reasonable attempt to satisfy tax law requirements.
Mixed approaches: some circuits applied modified versions.
The split is real and unresolved at the Supreme Court level. Circuit-level law controls in any specific case.
The 2-year requirement
Even if the late filing qualifies as a "return," § 523(a)(1)(B)(ii) requires that the return have been filed more than 2 years before the bankruptcy. Filing a late return immediately before bankruptcy doesn't satisfy this.
Practical implications
If you have unfiled returns, file them as far ahead of bankruptcy as possible (at minimum 2 years and 1 day, with extra cushion)
If the IRS already filed an SFR and assessed, your subsequent late filing may not satisfy § 523(a)(1)(B) under one-day-rule jurisdictions
Coordinate with tax counsel on whether to file a late return strategically before bankruptcy