Tax Refund/Repayment Question

[NikNY]

We are 6 months in to a 36 month plan. Our payment percentage is 1%. Our minimum amount to be paid is $37,200. Our payments are $700 monthly with $4000 paid at tax time.

Our tax refund will be large this year, somewhere near $10,000. If the trustee takes more than $4000, will it shorten my 36 months of repayments or will my base amount just be increased?

Thank you.

[justbroke]

Your plan base will be increased.

You should never have that large of a refund while in an active Chapter 13 that requires surrender of all tax refunds. With any luck, a Chapter 13 debtor should owe the IRS $1.00 when the tax return is filed.

It's living dangerously to expose that much extra cash to the plan if your intention, all along, was to try to keep some of it. Since I can't speak for New York, I will tell you that the Chapter 13 Trustees here in Florida would take that $10K quicker than you can say "but I didn't know."

[NikNY]

We will adjust our withholdings for next year. We had a foster son last year hence the bigger refund. Our tax refunds are never that high. They are usually around $5000. I am a teacher and do not get paid over summer. Usually, I use the refund for living expenses during those months. We will definitely adjust for next tax season.

[justbroke]

I'm not a tax advisor so don't take this as advice. If you have certain deductions, some of them are protected from the bankruptcy estate. For example, funds attributable to the Earned Income Tax Credit (EITC) have traditionally been untouchable by the trustee. You may want to reach out to your attorney. Maybe they can tell you if your funds are traceable to those expenditures for the foster child's care and whether or not you can exclude those tax credits.

[NikNY]

Thank you. I will give him a call. Going into this I did let him know that we usually get around $5000 refunded. That is why he suggested we put the $4000 repayment at tax time into the plan. He then said that we could keep an allowable $1500 or make adjustments to end sooner. However, I never got clarification on what he meant by that.

Your suggestion is greatly aappreciated.