Tax Refund, How is it applied?

[backontrackOH]

First, I am sorry if this has been covered in another recent post. I searched, but couldn't find a direct answer to my question. We are filing Chapter 13 by the end of this month, which will include my federal tax debt of around $8K due from 2006. My question: If we are due a refund for 2007, what is the scenario? Will the IRS apply the refund to the taxes due (and will the BK payment through the trustee be adjusted)? If the IRS sends us the refund, will we have to give it to the trustee? I would like make sure any money from a tax refund helps us out and isn't absorbed into the BK with nothing to show for it. Any help is greatly appreciated!

[lrprn]

Whether your trustee will take your 2007 tax refund for your creditors or not depends on the custom in your bankruptcy district and the trustee's personal practices. Some trustees take tax returns, some take them only if they are over a certain dollar amount, and some don't take tax returns at all.

The $8K you owe the IRS and included in your filing is considered a priority debt. The $8K will be paid back through your Ch 13 monthly plan payments. The IRS won't take your return to pay against the $8K.

The best way to ensure that your 2007 tax money helps you and not the trustee is to adjust your withholdings so you get a refund of less than $300 for 2007. (Uncle Sam makes a lousy savings account, especially in Ch 13 where we need all the extra cash every month we can get!) Here's the IRS Withholding Calculator with worksheets to help you figure that out - http://www.irs.gov/pub/irs-pdf/p919.pdf . You can adjust your withholdings throughout the year as needed.

[helpless]

I am in Ohio also and we had taxes included in our 13. Both the last two years we have had to call the IRS because our tax returns got flagged, but one call to their bankruptcy dept and we received both of our returns. I expected that last year, but this year our taxes were already paid, but they still flagged it. Long story short, we did get our refunds. Good luck. We have not had to give our refunds to the trustee. WHat district are you in?

[backontrackOH]

I am located in Montgomery County. Would that be the district? I am not sure what district you mean.

[lrprn]

I am located in Montgomery County. Would that be the district? I am not sure what district you mean.

There are eleven court districts in the US - here's the map of which state is in which district - http://www.uscourts.gov/courtlinks/ . Looks like Ohio is in District 6.

[kags1969]

I am in Texas and I owed Taxes in my bankruptcy. I was due a $1054 refund and it was applied to the taxes that I still owed and a note on my 13datacenter account came up "offset taxes". So they just offset my refund against my taxes due.

[helpless]

Ohio bankruptcy courts are divided into the southern district and northern district. I am in the southern district and have had no problems keeping my refund.