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State Taxes Owed Can't Be Deducted From Federal Refund

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    #1

    State Taxes Owed Can't Be Deducted From Federal Refund

    I filed in Oct 2005 and have 3 or 4 more monthly payments left to complete. I have paid each monthly payment a full week ahead of due date. Now, I can hardly believe what is happening. I got a letter from the Trustee stating that I owe them $748 in back taxes(refunds).

    As for the back taxes the Trustee claims are due, here is how the Trustee states it: "State Taxes OWED AND PAID by me CANNOT BE DEDUCTED from tax refunds due to the Trustee"

    ------------------------------------------------------------------------
    2005 Federal REFUND=$1190
    2005 AZ State OWED AND PAID=$431
    I paid the Trustee the difference which was $759.
    Trustee says I owe him the AZ taxes of $431!!!

    2006 Federal REFUND=$451
    2006 AZ State OWED AND PAID=$317
    I paid the Trustee the difference which was $134.
    Trustee says I owe him the AZ taxes of $317!!!

    2007 Federal REFUND=$0.00.......OWED AND PAID $33
    2007 AZ State OWED AND PAID=$317
    I paid the Trustee nothing because I didn't receive anything.

    So as I stated, the Trustee sends me a letter stating that I cannot deduct the amount I OWED AND PAID for AZ State Taxes and that I have 30 days to pay the $748 or my case will be discharged!!

    Is this a written law or is this guy just making this stuff up as he goes???
    My lawyer first told me that the deduction of State Taxes Owed was acceptable. Now, he tells me the Trustee is CORRECT and he's SORRY!!
    I called him again about this and now he tells me he will discuss with the Trustee. So, in the meantime, I have only a few weeks to scrape up $748. Something is terribly wrong here. Can anyone with some real legal knowledge on this help me out. Please.
    Tags: None
    #2
    In my state, Michigan, the trustee gets ALL of my federal refund, but NONE of my state refund. So I don't think that this is just particular to your region alone. It makes sense to me. You owed the trustee ALL of your federal refund. If you owed the State, then that would be on you to pay (or refund for you to keep)

    Comment

      #3
      Originally posted by pinzpilot View Post
      So, in the meantime, I have only a few weeks to scrape up $748. Something is terribly wrong here. Can anyone with some real legal knowledge on this help me out. Please.
      I was kind of surprised by this as well because it just seemed logical. But no, I was not allowed to "net" the state and federal taxes either and had to submit the full federal amount.

      But if you can not come up with the money is short order, I would be shocked if your lawyer could not work out some type of agreement with the trustee to help you out. This can be accomplished by either increasing your remaining payments to make up the $748 or by adding on extra payments to the end of your plan to make up the amount. In my District, I have seen cases where both approaches have been used to cure a deficiency.

      Comment

        #4
        Originally posted by itneverends View Post
        I was kind of surprised by this as well because it just seemed logical. But no, I was not allowed to "net" the state and federal taxes either and had to submit the full federal amount.
        Logical or not, I depended upon and listened to my attorney. So, when he first had me believing that there was nothing wrong and then does a 180 and tells me the trustee is correct..... my heart sank. How could he have not known this as a "given fact, or logical" just as y'all do?--(Rhetorical question)

        This bankruptcy crap and everything that led up to it has ruined my life. I'll never be able to buy a home of my own, physically and mentally crippled by the bastard doctors who bankrupted me and took away all that I've ever enjoyed in life. Yeah I know, I'm whining and full of self pity. But the fact remains, I will die a broken man and the sooner the better

        Comment

          #5
          Pinzpilot:

          Hang in there. It WILL get better--I promise. I KNOW it doesn't look like it now. My husband and I were mental veggies when we found this forum in April. We have learned alot--including how to out-lawyer our own worthless-soon-to-be-ex-attorney--and have gotten a lot of good advice and moral support just when we needed it the most. It WILL get better. There are lots of positive caring thoughts and prayers headed your way~~~
          "To go bravely forward is to invite a miracle."

          "Worry is the darkroom where negatives are formed."

          Comment

            #6
            Originally posted by pinzpilot View Post
            Logical or not, I depended upon and listened to my attorney. So, when he first had me believing that there was nothing wrong and then does a 180 and tells me the trustee is correct..... my heart sank. How could he have not known this as a "given fact, or logical" just as y'all do?--(Rhetorical question)

            This bankruptcy crap and everything that led up to it has ruined my life. I'll never be able to buy a home of my own, physically and mentally crippled by the bastard doctors who bankrupted me and took away all that I've ever enjoyed in life. Yeah I know, I'm whining and full of self pity. But the fact remains, I will die a broken man and the sooner the better
            If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

            Comment

              #7
              Exactly...BK is NOT the end...You WILL be able to buy a home again, even get into debt again, sad as it sounds...so there is a light at the end...but getting to the end is the part you need to get through...
              It's only $700.00 and if you think about all you've been through, you can do this.....really!!!
              Filed: October 1, 2007 341: December 10, 2007
              CONFIRMED: December 10, 2007
              Payment: $825 / Mo. for 5 Years-29 MONTHS OF Pmts Down 23 to go!

              Comment

                #8
                Although not a major setback, because you will ante up and pay the 700., it is a setback you didn't foresee. Don't even get me started on inadequate lawyers. I think they should provide their class ranking to the public.

                So, go ahead a whine and complain all you want and we will listen.

                Comment

                  #9
                  Originally posted by pinzpilot View Post
                  Logical or not, I depended upon and listened to my attorney. .......
                  What I typed might not have been clear, when I re-read it I can see how it might be taken as me suggesting "you should have know". That is not what I meant. I actually went throught the same thing you did and meant I thought it was totally logical to net the taxes and I actually submitted the net amount like you did. I also had to repay the higher amounts as well.

                  Comment

                    #10
                    I thought much like you did also. I owed the state this year, and had a refund from federal.

                    When I checked with my attorney she said "turn in the federal refund in full" and pay the state. There was no "net" difference.
                    Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
                    I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

                    Comment

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