Tax refund taking a long time to process

[avengers]

I had a $10k federal tax debt. The previous two tax years, I was under a monthly payment program and the IRS took the refund from me to service the debt.

So coming into the 2014 tax year, my tax debt was down to $5k. I filed chapter 7 in October 2014 and was discharged in January 2015. Since it's been more than 3 years since I incurred the tax debt, the tax debt was discharged.

I filed my federal tax return on March 1. I still haven't received my refund. Usually, I get my refund within 3 weeks of filing. It's now almost 3 months. So I'm wondering if this is due to the discharged tax debt? Maybe they are delaying processing it because of my BK. (I went to the IRS check status page today and it still says processing).

I don't get to keep my entire refund--I have to send the check to the trustee (and, oddly enough, the trustee already paid me the proceeds of the refund, even though I haven't sent any refund to him). But I'm still wondering why the IRS hasn't sent the refund to me.

[justbroke]

How do you know that the tax debt was in fact dischargeable and discharged? There is more than just a 3-year rule. The IRS could be attempting to make a determination as to whether your tax was discharged.

I'm wondering becuase you wrote "the previous two tax years" and then say you filed in 2014. If you are talking about "tax year" 2011, that would be dischargeable after April 15, 2015 since it's 3 years from when the tax was due without penalty (plus a few other rules).

[avengers]

The debt was definitely dischargeable. It was for tax year 2010, I filed a tax return for it, and I pass the 240 day rule. My attorney agrees that the tax was discharged. I specifically chose to file after April 15, 2014 because of the rules for discharageability and rejected one attorney who was encouraging me to file before April 15, 2014.

What this thread is about is my 2014 taxes, for which I filed a tax return on March 1, 2015. Had I not filed bankruptcy, the IRS would have taken the whole thing. Since I did file BK, they shouldn't take anything (though the trustee will take his share).

[justbroke]

The missing information was that you were talking about the 2010 tax year. Just so others understand, it has to be 3 years since it was due before filing your petition, you filed a return 2 years before filing your petition, AND it was not assessed within the last 240 days before filing your petition. If all three criterion are met and the IRS hasn't done some nasty tax liens, then the debt should be both dischargeable and should be discharged. (That was solely the reason I questioned the dates because you did not provide the tax year of the affected "discharged" taxes, and stated "two years" before 2014 (which would have been tax years 2011 and 2012)...)

You should contact IRS Central Insolvency Operations to determine just what is happening. Typically there is a "code" associated with any delays in processing and the IRS CIO would be able to tell you exactly what is happening, rather than guessing. Again, this could include whether the IRS is determining if the tax was in-fact discharged due to missing one of the 3 criterion for discharge.

If you do in fact meet all three then this may just be a delay and not a setoff of your refund. There is nothing more I can tell you accept to call IRS CIO. Only from the horse's mouth shall you find out the true status.

[LadyInTheRed]

I don't get to keep my entire refund--I have to send the check to the trustee (and, oddly enough, the trustee already paid me the proceeds of the refund, even though I haven't sent any refund to him). But I'm still wondering why the IRS hasn't sent the refund to me.

Are you sure the IRS didn't send the refund to the trustee? It would seem odd for your trustee to send you the proceeds of the refund before receiving it.

[justbroke]

LadyInTheRed I thought that but avengers wrote "I went to the IRS check status page today and it still says processing". Maybe I read too much into that, but calling IRS CIO will surely give them the true status.

[LadyInTheRed]

justbroke, my thought was that it may have left normal channels to be handled by CIO and so the online system didn't get updated.

[avengers]

You should contact IRS Central Insolvency Operations to determine just what is happening. Typically there is a "code" associated with any delays in processing and the IRS CIO would be able to tell you exactly what is happening, rather than guessing. Again, this could include whether the IRS is determining if the tax was in-fact discharged due to missing one of the 3 criterion for discharge.

Thank you for the suggestion. I called them. As LITR suspected, the IRS sent the check directly to the trustee.

I was confused because my last communication from the trustee (prior to receiving the check) specifically said I was supposed to send my refund check to the trustee. The check from the trustee made no mention of the fact that they received the federal refund and made no mention of whether or not they received the state refund check I forwarded to them.

[justbroke]

Cheers to one of our wonderful Moderators, LadyInTheRed ! Personally, I thought that Trustees were no longer allowed to "intercept" tax refunds so while it was a possibility, I didn't think they still did things like that. Live and Learn.

[avengers]

The odd thing was how long ago this happened. As I mentioned, I filed my tax return on March 1. Here it is, one week from June. And I'm worried that I'm going to get in trouble because I haven't sent a check to the trustee yet.

But when I was on the phone with CIO yesterday, I asked him when they sent the check to the trustee--March 11.

[justbroke]

Contact the Trustee and make sure they have recorded the tax refund. Then you can check that off. You may start it off as... "I contact the IRS CIO and they inform me that they sent my refund directly to...."