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W4 Tax Exemption change after chapter 13 confirmation

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  • W4 Tax Exemption change after chapter 13 confirmation


    My chapter 13 plan is confirmed and I will be asking this question to my lawyer however i would like to hear inputs from members as well.

    We are a family of 4 and i always had my W4 exemption to be Married and 2 which meant that I will get more tax refund at the end of year while my check will be smaller.

    Is it legal and Ok to change my W4 Exemption to my family size to 4 which means less tax refund (will still get a refund but not as much as i used to)?

  • #2
    When you file, they will look at your tax refunds and consider that as additional income (adding it back into the pile). I would try to adjust it so that you don't owe any money, but that you're not getting $$$$'s back. Some Trustees want every single refund (because they figure if you lived without it all year, then you can live on the budget as is). Even if you get a plan that requires you to surrender all refunds, you can ask permission to use it for necessities (repairs, delayed medical, car stuff, house stuff, etc). I had to surrender my refunds, but never actually surrendered one because I asked for permission to keep it. Usually a simple process.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #3
      I asked my lawyer and he said it is ok to adjust my w4 so my check will be higher and my refund will be less.

      hope the trustee will not be picky about changing my w4 to get more money and less refund. The refund will be taken by him


      • #4
        In my plan this issue is directly addressed as follows:

        "The Debtor(s) is directed to maintain the same number of tax exemptions for withholding as when the case was filed, except as required by a change in dependents allowance(s) and/or marital status. Should the Debtor(s) change the withholding exemptions, the Debtor(s) must amend Schedules I and J within 30 days, specifically noting the basis for the amendment".

        In that light, I would suggest you check your confirmed plan to see if it is addressed. You definitely don't want to do anything contrary to the specifics of your plan. Doing something contrary to your plan provisions could cause issues in the future. But, just like many issues, it is district and local specific.


        • #5
          Thanks did you mean the "confirmation order" that the trustee and the judge sign? If that is the case it didn't state that. It just stated that we have to pay unsecured creditors no less than 30k and to maintain insurance on all properties. Then it said how much we should pay monthly and the increase of payment after we pay 401k loan.


          • #6
            Originally posted by moses911 View Post
            Thanks did you mean the "confirmation order" that the trustee and the judge sign? I
            What the judge signs is the order approving your proposed specific plan to pay your creditors. In our plan there is a section titled "Tax Refunds" that spells out how tax refunds and tax exemptions are handled while the plan is active. If your plan does not prohibit changing the number of tax exemptions there should not be an issue.


            • #7

              I just checked my documents and there is a document 122C-1 (Calculation of disposable income). On that document Part 1 question 5 there is the following paragraph:

              "The number of people used in determining your deductions from income Fill in the number of people who could be claimed as exemptions on your federal income tax return, plus the number of any additional dependents whom you support. This number may be different from the number of people in your household."

              The number written there is "4". So does that mean that i'm safe to assume by changing my W4 to say married and "4" instead of married and "2" is aligning with what was filed?

              Or is my understanding is incorrect?


              • #8
                The exemptions on a W-4 are mostly only semantically related to the correct number to ensure that you have the appropriate withholding done. There's actually a worksheet that you can use to complete this. If you don't use Schedule A (Itemized Deductions) or have other major tax deductions (to reduce your income), then you can usually be safe with using the "correct" marital status and the number of dependents (see the instructions).

                Otherwise, if you're like me and other homeowners, you could get put in additional exemptions based on what's on Schedule A. The IRS guy helped me calculate mine (I'm not recommending calling them for help). he explained how it worked, went through all my deductions, and then came up with a number (MFJ - 6). I only had 3 dependents.

                The Trustee isn't looking at that number. The Trustee is looking at your tax return(s) and seeing how much refund you had. In many cases, your attorney will calculate that back into your CMI (by taking 1/12th of the average refund) to account for this. Otherwise, the Trustee "may" ask for all tax refunds. You should probably keep your tax refunds "low" anyhow since you won't be able to count on large refunds.
                Last edited by justbroke; 06-30-2017, 12:30 AM.
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog

                I am not an attorney. Any advice provided is not legal advice.


                • #9
                  Thanks. In the past i kept my expemption low only claiming 2 on federal and 0 on state so I can get a large refund at the end of the year. Now since the trustee will be taking it all i thought of changing my exemption to match the number of my family. The reason I put 4 because we have 2 children so the total will be 4 including me and my wife.

                  So i was afraid if i change it will cause issues but seems we are find as long as we don't owe taxes which we won't


                  • #10
                    moses911, Did you decide to modify your W4 holdings? My wife and I are just staring our planning and expect to file chapter 13 due to our income. one of the primary questions that plagues us is 'unexpected ' bills. we have always filed zero and stored the money at the end of the year for child care expenses. Father of 4, and a 7 month old eat up just about any 'disposable' income we thought we had. we cant afford to owe the IRS. the credit card companies are enough.


                    • #11
                      I made changes with no issue.
                      Discharge date: October 2017 (will it ever get here?)


                      • #12
                        Yes I modified it to match my family size. I asked my lawyer and he told me to do it.


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