Income Tax Refund

[cchater]

I am from the State of Kansas and I am in a Chapter 13 60-month plan. I have made 5 payments already. Will the Trustee take my income tax refund? I thought I read that they will let you keep $2000 and anything over that - they will take. Is there any truth to this? I could really use this refund! I appreciate your help!

[helpless]

I filed under old law and am in Ohio. We are allowed to keep our refund. I think that it varies from state to state, trustee to trustee. Does it say anything in your confirmation order? Good luck.

[HHM]

What is your percentage of payback to your unsecured creditors. If 100%, the answer is a definate no, but if its less than 100%, then it is certainly possible that the trustee may take it. But as helpless pointed out, it tends to vary from state to state.

[cchater]

Thanks for your replies! All it says in my papers is to make sure I submit copies of my returns so they will know my taxes have been filed. I am paying back to unsecured approx 20%...

[HHM]

Thanks for your replies! All it says in my papers is to make sure I submit copies of my returns so they will know my taxes have been filed. I am paying back to unsecured approx 20%...

Unfortunately, that is probably not a good sign. My advice to you, don't plan on getting your tax refund; meaning, don't do anything financially that anticipates you getting a tax refund. That way, if in fact you get to keep it, it will be like a bonus.

[cso5@]

I wasn't sure....

If I would be allowed to keep any tax refund, either.

And I never thought to ask the attorney.

I adjusted my withholding earlier this year, so I shouldn't get much of a refund.

Like you, my instructions say, submit copies of taxes filed each year to the trustee. I will have to ask my attorney if that means, to him, and then he makes a copy and sends it on to the trustee, or if I am supposed to send it to the trustee directly.

I also thought, if I am due a refund, I might just check the box that says, have this overpayment applied to next year's taxes. Then it will (eventually) go to me -- I could do this every year, and might end up with a nice little amount at the end of this bankruptcy period.



cat

[lrprn]

Unfortunately, that is probably not a good sign. My advice to you, don't plan on getting your tax refund; meaning, don't do anything financially that anticipates you getting a tax refund. That way, if in fact you get to keep it, it will be like a bonus.

We are in Ch 13 in Kansas as well. Don't know whether you have the KC or Wichita trustee - ours in KC stated he wanted our tax returns every year and would decide yearly if we could keep our tax refunds or not. We adjusted our withholdings in early 2006 so we wouldn't get much of a refund on purpose. We worked our tax figures out quickly last weekend - looks like we'll get less than $300 back

It's perfectly fine to adjust your salary withholdings now for 2007 so you don't face surrendering a big refund to your trustee next year. Here's an excellent publication from the IRS that helps you do that - http://www.irs.gov/pub/irs-pdf/p919.pdf . Well worth doing because it gives us 13ers a bit more income every month. The alternative - allowing the US government to use our money interest-free and then to be forced to give it most or all of it up to our trustee is the worst!

Bottom line - Uncle Sam is a terrible savings account, especially in Ch 13. Adjust those withholdings!

[aa06a47]

In Missouri, the trustee allows you to keep $1000 in tax refund and he gets the rest. I fiddled with my tax exemptions this year and from my initial estimates, it looks like I should have fiddled some more.

[cso5@]

Anyone know about NY?

How about NY? Anyone know if you can keep a refund here, or if there's a cap on how much you can keep?

Thanks!
cat

[SinkingFast]

Here's a link to a handy dandy little tax calculator provided by the IRS. Good for a quick, dirty guesstimate of what to expect whether you'll get a refund or owe based on your withholdings you claim.

http://www.irs.gov/individuals/artic...=96196,00.html

At our 341, our Trustee announced he is holding our Close until he sees our 2006 Income Tax returns. On the way out, our attny immediately advised we jump our exemptions to have less tax withheld for the remainder of the year.

You can jump your withholdings to 10 and not trigger an investigation from the IRS. Go over 10 and the IRS will come looking for you to ask questions. As our attny said, you don't want 2 branches of the Federal Gov't looking at you at the same time.

So you could go normal, however you usually withhold for part of the year, and then jump your dependents number later in the year. Just check the tax calculator from time to time to see where you are and adjust accordingly.

[Grace]

You can jump your withholdings to 10 and not trigger an investigation from the IRS. Go over 10 and the IRS will come looking for you to ask questions. As our attny said, you don't want 2 branches of the Federal Gov't looking at you at the same time. :cool

I looked all over the IRS web site, and I couldn't find information saying that anyone can claim 10 exemptions regardless of status and not face a penalty. Do you have information on this, SF? What fields can one fill out on a W4 that allow 10 exemptions for anyone?

[SinkingFast]

I looked all over the IRS web site, and I couldn't find information saying that anyone can claim 10 exemptions regardless of status and not face a penalty. Do you have information on this, SF? What fields can one fill out on a W4 that allow 10 exemptions for anyone?

This is what the Payroll Dept Head of Hubby's Company told Hubby when he changed his withholdings upon our attny's advice.

The day after our 341, Hubby went to change his exemptions and we set up for 10. When Hubby was paid, we noted that withholding at 10 did not make a significant difference in Hubby's paycheck or reduce the amount of Federal income tax withheld. The attny said for us to get the Federal tax withheld as close to Zero as possible.

Hubby went back to the Payroll Dept to get the paperwork to change to a higher number. The Dept Head told Hubby if we went over 10, it would automatically trigger an IRS audit of us. So we left our exemptions at 10.

Is the Head of the Corporate Payroll Dept of a Company with locations in several different States employing several thousands of people a good enough source??!!

And our attny said lots of people change exemptions during the year, every year. Withhold at Zero to start the year. Get their taxes paid in. Then jump the number toward the end of the year. Get more money in their paychecks for the Holidays.

[BK'd-Betty]

W4's

I can confirm what SinkingFast has stated as well.

I was the Comptroller for the largest construction company in NYC in the late 90's to early 00's (I left that job and went into another field completely in 2002). Not only did I oversee the entire accounting staff, I was also head of the payroll department and was responsible for the weekly payroll for several thousand people.

In the normal course of business, the IRS never sees your W4, it only stays on file with the employer.

The reason claiming more than 10 exemptions on your W4 triggers an IRS alert is because the employer is *required* to report any W4 that has more than 10 exemptions to the IRS.

The reason one cannot locate this information on the IRS website is because it has to do with payroll withholding and is a regulation that is required to be followed by the employer, not the employee.

If one chose to look hard enough, the information might be found under business tax/payroll withholding - probably in an publication regarding employer withholding.

Any penalty to the employee would have to do with underwithholding.

If an employee doesn't pay 90% of his/her tax liablity for the year by the end of the year, they can be penalized by the IRS.

To avoid they penalty you could make quarterly estimated tax payments to make up the difference, or adjust your W4 accordingly.

[Jenn]

I have to give all my refunds to my trustee, Im at 26% repayment, at this point- I try not to think about it. Ive pretty much accepted the fact that I will not have any money till I am out of this whole deal.

[dac67]

I did not know any of this. My hub jumped his to 13 for several weeks and is now put it back to 0. He can change his own on a work computer. So he could go in and change it every so many weeks.
Well you learn something new every day. We will have to wait and see if anything comes of this.