IRS Refund Offset Question

[justbaby]

I filed Ch 13 in 2010 (almost to the end, just a few more months). I've never had my tax refund offset for any reason. I had to amend my 2008 and 2009 taxes right before I filed because I used a "side of the road" tax person that included false information on my 1040. Anyway, I owed IRS but included the amount in my Ch 13. They sent in a claim and they have been paid, full claim amount. Fast fwd to now. I had to do an injured spouse form this year with my 1040 because my husband and I filed joint and he has some outstanding tax debts. Been waiting since Feb and finally checked my IRS transcript. They have offset the refund amount for an "outstanding balance" for my 2008 and 2009 taxes. How is that right? They sent in for a certain amount to my trustee/lawyer and that's what they got. How can I still owe? Any help appreciated. I've already waited their 11 weeks processing time and now this. UGH!

[justbroke]

First, I'm not a tax professional so take this as my layperson's view. Were you married when you filed for bankruptcy? Did you always file married filing separately? There are just too many factors to guess at just what happened here, especially since you state that you changed your filing status in the current year. That may or may not have confused the IRS.

In any event, the IRS typically does not offset a pre-petition tax debt with post-petition tax refunds because it would be a violation of the automatic stay. Because your case is going to be very fact specific, I can't tell you if the IRS has indeed violated the automatic stay. Additionally you say that your husband has tax debt, and I"m now guessing, and that tax debt was "post-petition". Even though you filed an injured spouse form, the IRS sees the other tax number and considers this, likely, to be post-petition tax "marital" debt and subject to offset. Please remember that the automatic stay does not protect you from post-petition tax obligations.

Again, this is very fact specific and you should reach out to your attorney.

[justbaby]

You are absolutely correct, there ARE so many factors to consider. But to answer your questions - Yes I was married when I filed bankruptcy. We were behind on our mortgage which is why I filed. The home is only in my name and I carried most of the debts, so I filed alone. Since the bankruptcy, we have filed married filing separately (before that, our tax "professional" had me as head of household, hence the reason I had to amend 2008 and 2009). This is the first year we have filed married filing joint. We had to do it this way because we have marketplace health insurance. It's a requirement. So with knowing that he has past IRS debt, we did the injured spouse form. He always owe because he's self employed so he's carried a balance since 2003. SO to sum it up, I filed bankruptcy alone. We filed jointly with an injured spouse form (mainly to protect my refund from being offset by his debt). The automatic stay should still be in place for 2008 and 2009, those are the only years I owed and as stated before, they were included in my Ch 13.

[justbroke]

You would really need to speak with your attorney. I do not know personally if the IRS offset your pre-petition debt or the IRS is offsetting post-petition arrearages from your spouse! If it's a post-petition setoff (offset) of your post-petition (or your spouse's pre-petition) arrears, this may be fair game. I don't think the injured spouse form helped especially if your spouse already had issues.

Have you actually tried calling the IRS and speak with a live person?

[justbaby]

Yes, I definitely plan to do that first thing in the AM. I did speak with a regular CSR at the IRS and she specifically told me it was for my debt from 2008 and 2009. When I looked on the transcript, it states this as well, my SS# and the years. I need to speak with another dept at the IRS which I haven't done that yet.

[justbroke]

You may need to speak with Central Insolvency Operations which deals with bankruptcy. This could be an error on their part if they are telling you that they offset a pre-petition debt with post-petition money in an active Chapter 13 bankruptcy. Technically, they could "hold" it and seek permission from the court by filing a Motion for Relief from the Automatic Stay (RFS), but I find that the IRS typically does not do so in small cases. Don't ask me what "small" is, but I have not seen the IRS do this in cases even where $50K was owed pre-petition. Again, the joint filing probably threw them for a loop and whoever looked at your filing and set an offset, may have made a mistake.