all the sudden we owe tax

[seahawk4life]

filed in august, 341 was in october...plan was approved in january and we thought we were going to get a tax refund being that we have almost every year. After filing taxes i discovered we owe about 750.00 to the irs which obviously while in a 13 its hard to come up with the money to pay. How is this going to work with the IRS? We may be able to set up a installment agreement with them but how will the trustee handle this? All i can think of the reason we owe is because our mortgage is included in the plan and after i filed from about october to the end of the year the payments to the chapter 13 went to the trustee's holding acount till the plan was approved hence mortgage wasnt paid...so thats a few months or more of no interest to write off. If the mortage was paid right away then i could have written off that interest and then recieved a refund possibly. Im just a little confused

[elflaco]

I can actually help you out with this one.

Our first year filing taxes after our 13, we ended up owing nearly $3,000 (my wife cashed in her 401K and Roth to keep us afloat before we realized we had no choice but to file for BK). There is a form that you send to the IRS (check with your accountant or tax preparer) that will request a payment plan and ask you to supply the amount that you can pay per month. The IRS is actually very good at working with you to set up a payment plan, you just need to make sure to follow up with them. It is the IRS, so you will have to pay some penalties and interest, but it shouldn't be too painful with the amount you owe. The second year we ended up owing about $1,000 and again set up a payment plan. Hopefully we've tweaked out withholdings enough so we only owe a little or break even.

As for the Trustee, the only thing they care about is if there is money that they can take from you. If you owe, they won't say anything (unless the amount affects your ability to make your monthly BK payment; if that's the case, confer with your attorney).

I'm hoping we break even for the next 3 years; the Trustee and our creditors can suck it.

Hope this helps...

[Billssuck]

We too filed our ch13 last year and then owed taxes this year ($1,100) when we anticipated about a $2,500 refund. I know why I owed and basically my adult son (a full-time student) claimed himself because he supported himself because we no longer could, we lost the child care deduction for our youngest son, and not enough taxes was withheld from my husband's pay. Anyway, if I was you, I'd call the IRS to see about the payment plan while in a ch13 (if it's allowed). And...I'd talk with your lawyer because obtaining new debt while in a ch13 to pay your taxes may not be allowed. Also, I know if need be, that the IRS can file a "post claim" on your ch13 and add it to your plan...you'd need to talk with your lawyer about that too.

For us, too many things hit us at once (husband lost job and found another making $1,000 less/mon, owe the IRS, etc.) that we filed to modify our ch13 to surrender our home and we used one month's mortgage to pay the IRS. Stinks but that is what we did...we are now in a pending foreclosure status.