recent case out of the US Bankruptcy Court in the Southern District of Florida, Coyle v. U.S., has rejected the McCoy line of cases and relied on the beard test to determine whether tax debt based on returns filed after IRS assessment can be discharged. The taxpayer in question filed returns after the IRS created substitute returns and based it’s assessment on them. The Court cited Pendergast v. Mass. Dept. of Revenue 510 B.R. 1 (B.A.P 1st Cir., 2014) and wrote that “if a return is filed late, discharge-ability depends on the taxpayer’s cooperation with the taxing authorities”. It rejected the McCoy reasoning and stated that it agreed “with the IRS and those courts that have rejected a narrow reading of the Hanging Paragraph under which the only late filed returns eligible for discharge pursuant to Sect. 523 (a)(1)(B)(ii) are returns filed under Sect. 6020(a)” This is a small bit of good news for taxpayers with large tax debts who are contemplating bankruptcy and have filed the return(s) late. It isn’t good news for those who filed late and filed after the IRS assessed a debt based on an IRS Substitute Return. If you live in the 9th Circuit, the IRS position mirrors this case and is currently how cases are being treated in Arizona. This could change.