Any way to protect 2009 Tax Refund

[c5racing]

I just filed my Chapter 13 BK about 2 weeks ago. My 341 meeting is in early December. I don't imagine that it will be confirmed before sometime in mid January if everything is approved.

Is there any way to protect my 2009 tax refund? What if I file my refund before the confirmation? I don't have many assets and am under the $$ allowed in exempt. Can I list my expected refund as an asset to protect it?

[Flamingo]

I just filed my Chapter 13 BK about 2 weeks ago. My 341 meeting is in early December. I don't imagine that it will be confirmed before sometime in mid January if everything is approved.

Is there any way to protect my 2009 tax refund? What if I file my refund before the confirmation? I don't have many assets and am under the $$ allowed in exempt. Can I list my expected refund as an asset to protect it?

Since you already filed, any income tax refund coming in from now until your discharge falls under the control of your trustee. Talk to your attorney who will advise you what occurs in your district and whether or not it needs to be submitted when received by you.

[HHM]

I just filed my Chapter 13 BK about 2 weeks ago. My 341 meeting is in early December. I don't imagine that it will be confirmed before sometime in mid January if everything is approved.

Is there any way to protect my 2009 tax refund? What if I file my refund before the confirmation? I don't have many assets and am under the $$ allowed in exempt. Can I list my expected refund as an asset to protect it?

Too late, BK is already filed. Unless there is an exemption or if the refund is relatively small, kiss it good-bye (sorry to say). It doesn't matter when you file your tax return.

[tjs1970]

if this person were able to do the income taxes before filing the chapter 13, doesnt the trustee still have a right to put the refund into the plan?

[justbroke]

if this person were able to do the income taxes before filing the chapter 13, doesnt the trustee still have a right to put the refund into the plan?

Yes. Unless you somehow exempted it (and the exemption is likely a one-time deal during the entire Chapter 13 commitment period), you must surrender the refund. Of course, this varies by District and there are some specific things that are protected. The portion of a refund that is protected is related to the Earned Income Credit (EIC). EIC payments can't be taken by the Trustee. Also, some Districts allow you to keep some portion of the refund (and this varies too).

And, to make matters even more confusing, some Districts require the attorney to calculate your current monthly income (CMI), by including your average tax refund (divided by 12). This way, the refund is already calculated into your disposable monthly income (DMI).

Yes, it does get complicated, but the bottom line is that in most cases, you have agreed to surrender your DMI to the custody and control of the Trustee. In other words, you give up all "extra" money for the life of your plan. That's unless you're in a 100% plan.

I hope that helped more than confused... but it is confusing.

[tjs1970]

will the trustee ask to see those tax returns? what if they dont like how you figured your deductions on the returns themselves? they are not in the business of helping audit them are they? if i have returns that are walking on the edge, but get me a higher refund, are they going to question those?

what if i get the refund before i file, but i spend the money?

[Mi Bankruptcy]

Your best chance to keep it would have been to exempt it prior to filing. We had enough left over in our our BK ( chapter 7) that I exempted a anticipated 6k for our return. If you have enough to exempt it see if you can amend the the return before the 341.

[justbroke]

will the trustee ask to see those tax returns? what if they dont like how you figured your deductions on the returns themselves? they are not in the business of helping audit them are they? if i have returns that are walking on the edge, but get me a higher refund, are they going to question those?

They do look at your tax returns! It's an excellent source of information about your earnings, expenses, and exemptions. When you file, you are required to file one year of tax returns. However, the Trustee usually wants two additional years (not including the one filed with the petition). In most Districts, you have to provide your Trustee with a copy of your tax return every year by April 30th! (There are only a few Districts that don't require annual returns to be sent to the Trustee.)

Large refunds tell the Trustee that you actually have more disposable income than you may have stated on your Means Test (B22C/B22A).

what if i get the refund before i file, but i spend the money?

Spend it on necessities. This can be medical care, home repairs, food, clothing, etc. This can even be spent on your attorney. Just don't go buy a big TV with it.

[tjs1970]

so what you are saying is that i may not want to get a big refund since it could raise red flags about my sitaution............i have been unemployed since march, but have started up in real estate and have incurred alot of expenses trying to get that going......so i will have some good deductions that could result in a refund......i am guessing i will be asked how i paid for those things?

what if i have not alot of money in my banking accounts and get a big refund? will that possibly be able to be exempted?

if my wife owes back IRS taxes and they offset a portion of our refund to pay that off, but we still get something or nothing, but the back taxes are paid because of it........how will they figure that in?

i could see how an attorney might NOT want me to have the back taxes offset, so i can say that is more of the money in my payment needed to go to that instead of unsecured creditors.......? am in off base here ?

[justbroke]

so what you are saying is that i may not want to get a big refund since it could raise red flags about my sitaution............i have been unemployed since march, but have started up in real estate and have incurred alot of expenses trying to get that going......so i will have some good deductions that could result in a refund......i am guessing i will be asked how i paid for those things?

It's not a red flag, but it is a flag to the Trustee. A tax refund is a "return of overwithheld" money. Bankruptcy Courts and Trustees treat it no different as being held in a savings account (without the benefit of accrued interest earnings).

what if i have not alot of money in my banking accounts and get a big refund? will that possibly be able to be exempted?

If you do this before filing, you may be able to exempt it. It is more likely to be exempted if you live in California, than if you lived in say, Florida. To compound this, some States restrict how much cash you can actually exempt!

if my wife owes back IRS taxes and they offset a portion of our refund to pay that off, but we still get something or nothing, but the back taxes are paid because of it........how will they figure that in?

It's based on what you actually get back (refunded). If the IRS uses their right of offset, then you would get less back. The Trustee would be interested in what you were actually refunded. (If your Trustee takes refunds.)

i could see how an attorney might NOT want me to have the back taxes offset, so i can say that is more of the money in my payment needed to go to that instead of unsecured creditors.......? am in off base here ?

Doesn't work like that. If you owe taxes then you actually need to declare that in your Chatper 13 separately. Income taxes enjoy something known as "priority" in Bankruptcy. Priority tax debt is not treated the same as general unsecured creditors. In a Chapter 13, priority tax debt must be paid during the Chapter 13. So, if you owe back taxes, you basically get to put that into your Plan. The IRS is more than likely NOT going to use their right of setoff if you include the IRS as a priority unsecured creditor in your Plan.

[tjs1970]

i went through my office recently in my house and cannot seem to find the paperwork from the IRS that says my wife owes back taxes to them.......i think i got it about 8 months ago and now cannot locate it.....is there something i can do to get that from them?

[justbroke]

i went through my office recently in my house and cannot seem to find the paperwork from the IRS that says my wife owes back taxes to them.......i think i got it about 8 months ago and now cannot locate it.....is there something i can do to get that from them?

Your wife can call the IRS and ask for her "balance".

[tjs1970]

if i get my refund and spend it......before filing.......whats the worst they can do? put that amount into the plan right? it amounts to a loan of some sort but i get the benefit of the money now? ......is this accurate?

[justbroke]

if i get my refund and spend it......before filing.......whats the worst they can do? put that amount into the plan right? it amounts to a loan of some sort but i get the benefit of the money now? ......is this accurate?

Just spend it on necessities!

[sufferingAZ]

We want to file a chapter 13 but waiting for tax return. "Necessities" would that include a car? We NEED to trade in our old car and get another one before being put under the thumb of a trustee. Use our old car to trade in and our tax return (about 8,000.) for car that runs. Now would that rasie red flags?