IRS Refund & State Tax Question

[dovette7]

My 341 Meeting is April 10th. In my plan we owed a total of $15,500 in Federal Taxes and $1200 in State Taxes (from years 2004-2005)

For 2006, there was a Federal Refund of $5600 and a State Refund of $1700.

Ok... We filed bankrupty on Feb 15th. On March 21st, the IRS applied the $5600 refund to what we owed for 2003-2005. My attorney had told me that the trustee would get that refund. The IRS applied it to what was owed and amended thier claim for the balance.

The State hasn't filed a claim yet, however today I recieved a check for $1700 from the State. I am assuming I cannot have that money that it will go to the trustee.

Just curious as to anyone else's experience with the tax issues or what you think might happen here if anything.

Will trustee get the $ back from the IRS?
Will he want the state refund I recieved?

[SinkingFast]

Most likely, the Trustee will apply the $$$'s he/she received from the IRS toward your debt to the IRS. Your Plan payments likely won't change. If you're at less than 100% payback to Unsecureds, the Trustee will simply add the IRS $$$'s into the pie for your Unsecureds. If you're at 100% payback, you may pay for fewer months on the end of the Plan.

As far as the check you received from the State,......... Don't cash it! Don't deposit it! If you cash it, it's too easy to spend it. If the Trustee decides to take the refund, you could put yourself in a bind to come up with the funds.

Let your attny know the State sent you the check and how much you received. Your attny will contact your Trustee about the State Refund. The Trustee may want that check too. Or the Trustee may allow you to keep it. It's really up to the Trustee to decide.

[cso5@]

Concerning tax refunds....

I was due a small (~$600) state tax refund. I had asked my lawyer about if it would be taken by the state tax department because in my plan, too, there are back taxes -- both state and federal. He said no, since the taxes were already part of the claims filed in my bankruptcy, I would get this refund.

Ever skeptical, I checked the "check refund status" site every day.

And one day, it said, there's a problem with your refund, status cannot be provided." Aw, heck. I knew it. But I called them anyway....it listed a number to call. I fully expected to hear - you are bankrupt. B-A-N-K-R-U-P-T. What makes you think you'd get a tax refund?? Especially since you owe back taxes?

But the lady said it just meant that the trustee had to ok the release of funds.

So maybe that is the case with you, too? That you got a check means the trustee okayed it?

I hope so, for you.



PS filed April 20, 2006 -- coming up on one year! Woot! So I had been in my plan for almost a year when taxes were filed this year. Maybe that makes a difference, too, because your plan is so new?