Confused - Taxes

[jherron]

Hi everyone. My husband and I filed Chpt 13 last April. I've been reading on here about having to turn over any tax refunds you receive to the trustee. I was never told (by trustee or attorney) that I needed to do this. We received $5K back in Feb for 2008 taxes, but it is all gone. We paid off payday loans, caught up on utilities, and bought items we needed for our home. Should I call my attorney and tell him we got a tax refund? I'm afraid he will say we need to send the trustee the money, but we don't have it now.

I also read about changing my tax withholdings. I'm afraid to do this because I don't want to end up having to pay at the end of the year, because I know we won't have the extra money to pay taxes. I like getting the refunds, because it allows my husband and I to do house repairs we weren't able to do during the year.

Any advice is greatly appreciated.

[Flamingo]

Before you spent that refund, you should have contacted your attorney. Please contact your attorney immediately. It may be possible that you can keep that refund but for that amount it may be an issue. Anytime during your plan when extra funds come in like that or an increase in income, inheritance, etc.,, unless you are specifically informed otherwise by your attorney you need to advise your attorney right away because nondisclosure of information like that can result in your Plan being dismissed.

[jherron]

I wasn't aware I had to possibly give up my refund until I started reading this foum. I went ahead and contacted my attorney's office after posting. The paralegal said she didn't know anything about me having to submit my refunds, but wants me to fax a copy of my return to her on Monday.

Thanks for your reply

[sharina]

Yeah, I don't get it either. If I had never found this board, I would Have NO idea that any such funds even needed to be brought to the attention of the lawyer or trustee. We rec'd absolutely NO instructions to this regard from anyone throughout the process. I do know our Trustee kept extra IRS funds that had to do with stimulus money that was not paid to us and a tax debt. And I am in a 100% across the board payback.

I am A-Ok with her keeping and distributing any excess funds 'cuz then I am just paid up faster BUT Why in the world would we not be advised of the "rules"????

How can they dismiss a case for certain things a debtor does (as Flamingo mentions in her reply) if the debtor was not given advance notice that they needed to do certain things? Makes no sense at all. Did we just get a bad attorney?

[Flamingo]

I am sure you were all informed to contact the attorney if you had any extra funds or income come in during your Plan. That would include tax refunds unless otherwise instructed by the attorney or trustee. Sometimes there is verbiage right in your confirmed plan information - it was in ours and also that we had to provide our state and federal tax return copies to the trustee within 5 days of filing. Pull our your confirmed plan and read for any information you may have missed. In any event when funds come in like this, to protect yourself and your plan, contact your attorney and ask, don't assume. Most of the time folks get to keep their refunds or a certain percentage thereof if it is a large amount. Hopefully the OP will not have an issue as to his/her large refund that was spent.

[HHM]

All Trustees have a Trustee Information Disclosure...actually, one of the quetions asked you at the 341 meeting is if you read the disclosure...so let's not kid ourselves that you were not aware that tax refunds were subject to disclosure.

[sharina]

HHM and Flamingo, NONE of the information you mention was given to us by our Trustee or Lawyer. In fact, we met with a representative of the Trustee and not the Trustee herself.

It's true. I am not kidding myself as you say.

I filed in Minnesota if it matters.

[Flamingo]

HHM and Flamingo, NONE of the information you mention was given to us by our Trustee or Lawyer. In fact, we met with a representative of the Trustee and not the Trustee herself.

It's true. I am not kidding myself as you say.

I filed in Minnesota if it matters.

Did you receive a copy of your Plan Confirmation Order after it was confirmed? It is chock full of information/instructions. Were you given any instructions as to what to do over your Plan years as to income increases/decreases, lottery winnings, inheritances, bonuses, etc.? In any event, what you need to do in order to avoid any future problems that may arise if this amount is not disclosed and discovered (it's a large amount not a few hundred dollars), is contact your attorney and ask. Remember, the trustee is in control of your entire financial house during your Plan from the day of filing to the day of discharge. Decisions are not yours to make unless otherwise instructed. Changes to the income going in and out or any unexpected windfalls or decreases need to be reported immediately to your attorney.

I reread your initial posting - you state you obtained this refund in 2/08 - is that a typo as you state you filed "last April" which one would assume would be 2008.

[sharina]

Flamingo - I am not the OP who has the refund, I owe the IRS. I understand why a trustee would want to keep refunds, though, I was simply stating that I was amazed that none of this information was given to us. Even though you don't believe me - doesn't matter. I know what I got and it was nothing like you state.

My confirming order simply states the amount of my payment - that's it.

[jherron]

I looked through the papers I received and it said nothing about submitting refunds to the trustee. As mentioned in my earlier post, I contacted my attorney's office and they know nothing about me having to submit refunds. I am faxing a copy of my tax returns for 2008 to them on Monday.

I asked my attorney about reporting any bonuses/pay raises. He said there was no need to do so.

To clarify, I filed bankrupt in April 2008. I filed my 2008 taxes in Jan 09 received my 2008 tax refund in Feb 2009.

Thanks for all the replies. I'll just have to wait and see what my attorney's office says after reviewing my tax returns.

[sharina]

Please update us. It would be interesting to know the outcome.

[Flamingo]

Flamingo - I am not the OP who has the refund, I owe the IRS. I understand why a trustee would want to keep refunds, though, I was simply stating that I was amazed that none of this information was given to us. Even though you don't believe me - doesn't matter. I know what I got and it was nothing like you state.

My confirming order simply states the amount of my payment - that's it.

I didn't state I didn't believe you - sometimes information is easily overlooked at first and found when documents are read later or you just had an attorney who overlooked telling you or giving you and the OP appropriate information. While the are attorneys who give some folks stack of information, there are attorneys who provide little if no informatoin just because they forget, are busy or think they already told their clients. That is why it is always best for anyone filing to educate themselves as much as possible about the Chapter they are filing or before they take any financial action(s) during their plan, to always check first with their attorney before actually proceeding.

Sorry, the second portion of my posting was for the OP as to the date issue.

[bigreddog]

We got a $3300 tax refund last year. We were so shocked we checked with our attorney before our accountant finished the returns. At first I told the accountant to have it applied to next years return. But I emailed my attorney and he responded that we could keep it. Put it in the bank for emergencies. He did say to keep track of where it went. We also got our stimulus checks. And I too went over our final BK paperwork and it made no mention of tax returns. I ALWAYS ask my questions to my attorney via email w/ a request for read so I can prove I asked first.

[beam14]

Return

One thing we have to be awrae of is that every trustee, district, and state is difference. My parents filed in AZ and the trustee wants any Tax Refund amount over 1000.00 (So they increased exemptions). In Tampa my trustee never asked for refunds and I did not have to turn them over. The best thing for you to do if you are worried and it is not spelled out anywhere is notify your attorney or look at your trustees web page to see if it is in any of the FAQ.

Beam14