Tax debt and refund

[Fedup79]

Hello everyone!!

I owe over $16k in back taxes that is included in my Chapter 13 100% payback 5-yr plan.

we are due a small refund, which our attorney listed that we are allowed to keep and Trustee did not object.

i called the IRS and waited 30 minutes while they updated our Bankruptcy paperwork in their system.

my question, since we are under the automatic stay and my tax debt is included in our plan, will we get the refund or will the IRS hold it and pay it toward our tax bill?

[justbroke]

Yes, you will get your refund. It may be "slightly" delayed. Mine was held up... 1 day.

[mel22nv]

Interesting I had a refund last year and the IRS kept it but I efiled not knowing I should have sent paper copy is that why they took mine?

[justbroke]

Interesting I had a refund last year and the IRS kept it but I efiled not knowing I should have sent paper copy is that why they took mine?

Did you have a confirmed Chapter 13 plan in place? The IRS is usually pretty good with this stuff.

[mel22nv]

justbroke yes I did my plan has been confirmed since 2018; they sent me a letter and took it saying it would go toward my 2016 tax bill I let the trustee know; I just hope I don't owe too much this year what happens if I do?!

[justbroke]

If you are in an active Chapter 13 and the IRS was notified and filed a claim, then they should not be offsetting your pre-petition tax debt with post-petition refunds. If this was from a post-petition tax due, then that is a different case. Anything that happens post-petition is fare game for the IRS.

[mel22nv]

Attached is part of letter they sent and it was for taxes included in Chapter 13 for 2013 taxes?! Is it because 2013 taxes are now unsecured debt due to 3yrs?! Total confused as to how they took my $288 and Trustee/my attorney just said ok?!

[justbroke]

That sounds like an issue. If the IRS was included as a creditor and filed a claim for the 2013 taxes, they should not be using a setoff of your 2018 tax refund. In some limited cases they could do this, but only by going to the bankruptcy court and filing a Motion For Relief From Stay for that specific year. They almost never do so, because they are paid through the plan.

In fact, your 2013 taxes should be dischargeable which further means this shouldn't have happened.

Something is wrong. I'd call the Insolvency Department at the IRS and make sure they understand. It reads as though they don't think you filed bankruptcy.

It's a violation of the automatic stay for even the IRS to take money to pay pre-petition debt.

[Fedup79]

Thank you so much for the quick response, I feel much better!