? about income taxes in 13?

[mandy25]

I have read in a few posts that the trustee only takes a percentage of your income tax refund. THen I have read that it takes all of it. What is your experience with this. We get back about 4900 mostly earned income credit and child tax credits. I am not sure if I am asking this where anyone will understand or not but if they do take it all will that go towards the payback period and help you get it paid back quicker or will it just be extra income for the creditors? We have an app. Friday with a bk lawyer to see if we can file chapter 13.
Thanks for any help on this.
Mandy

[bobby125]

It appears to be different everywhere, but I think that for at least the first 3 years they take it all, now I was told you, by my lawyer, to file through the mail (not e-file) and if you get a return, let the trustee come take it.

I just started chapter 13, but I adjusted my witholdings so I dont get anything back........

just my experience and opinions...

[lrprn]

Federal and state treasuries treat a taxpayer's income tax refund depending on the chapter the bankruptcy was filed under:
Chapter 13 - Income tax refunds are returned to taxpayers
Chapter 7 - The refund is held until a discharge is issued

During your Chapter 13 Plan, you are required to surrender any tax refunds to the Chapter 13 Trustee. Some trustees will take the whole refund, some only take a portion of it, and some don't care about the refund and tell you to keep it. As Bobby said, it's quite inconsistent between states and between trustees.

Ask your lawyer what the Ch 13 trustees do with tax refunds in your area. As Bobby recommends, be sure to adjust your withholdings immediately to ensure you are as near to zero refunds as possible for both federal and state tax returns while you are in Ch 13. Even a liberal trustee can change his/her mind later and start asking for your refund - three to five years is a LONG time!

[mandy25]

OK thanks for the info

I have one other question, if we change my hubbys earning to get his earned income credit thru the yr instead of at tax time will they consider that as fraud or trying to cheat them since up until now we have always gotten it at once?
Thanks again for all the info.
Mandy

[anonymuse]

In Colorado, under a Ch 7, you're refund is actually exempt (one of the few states that does that.)

[lrprn]

I have one other question, if we change my hubbys earning to get his earned income credit thru the yr instead of at tax time will they consider that as fraud or trying to cheat them since up until now we have always gotten it at once?
Thanks again for all the info.
Mandy

I believe the answer is no because the income figures on your Ch 13 plan are based on your annual gross income before federal and state taxes are taken out. Adjusting your deductions to reduce your withholding doesn't change your gross income, so you aren't hiding anything. (If I'm off base here, tax experts, please set the record straight.)

Think of it this way - if you adjust your withholdings so there's only a small or no refund each April, you'll have more dollars immediately accessible every month during your plan. If you don't adjust your withhholdings, then those extra dollars each month are adding up to create a bigger annual refund instead. Then if your trustee is one who keeps your whole refund every year to distribute to your creditors (this is what case law in most states supports currently), your creditors get your extra withholding dollars plus the government has been using your money tax-free for a year to boot. Who wants that?

[mandy25]

Thanks a bunch

Thanks for the answering my questions so quick I appreciate it alot.
Gonna have dh change his deductions on his check ASAP.
Thanks again
Mandy