Chapter 13 tax question

[jrs]

Just wondering if someone can help.. My question is when we filed,(almost a year ago) We owed about $3000 in federal taxes. That amount was payed thru the plan. After changing filing status (both to married zero), in a effort as to not owe as much..
This year we still owe almost as much. Can this new tax bill be paid in the plan? We just dont know how we are going to pay it.. It looks like we will have to file single zero to get a refund.

[Flamingo]

Taxes owed after your filing date are your own responsibility. The IRS will not reconize a second payment plan option through them since you are in Chapter 13 and have included previous taxes owed them - they view that as a payment plan. What you need to do, if you cannot pay the taxes in full, is first contact your attorney and advise him of what is going on and then contact the IRS, advise them you are in a Chapter 13 and the IRS is included in that Chapter 13 for previous taxes owed being paid to them via that Plan. You will be given instructions to put you in contact with their Bankruptcy division in your area. YOu will probably have to work out a voluntary payment plan with them as to what you can afford to pay them (as we had to do) and interest and penalties will accrue during that time.

Debt incurred after your filing is your own responsibility. That is why it is important to try to save whatever you can in case unexpected bills pop up as you will need cash on hand to pay them. The other way out of this is to have a family member pay the taxes for you and you can reimburse them later, maybe put on one of their credit cards and you give them money to make the payments, etc. Best of luck to you - the IRS will work with you on this.

[despritfreya]

You have three choices. . .

1. Do not mess with your Plan payment and just try to work out an installment agreement with the IRS on your own.

2. File a Motion for Moratorium on Plan payments so that you can divert the Plan payments to pay the tax over a short period of time. The problem with this is that the Plan payments will have to be made up, typically by increasing them once you resume payments to the Trustee.

3. File an Amended/Modified Plan to add the post petition taxes (increasing payments to cover it) but, before you do, contact the bk unit of the IRS (called Special Procedures) and make arrangements for the IRS to file a "1305 claim".

If you have an attorney discuss these options to find out which best works for you.

Des.

[Flamingo]

Good advice by Des but note that filing Motions or further work done by your attorney will cost you - when we filed a Motion during our Plan to refinance and buy out of our Plan it cost us $400.00. Filing an amended/modified plan will probably cost you more in attorney's fees - your retention letter/agreement with your attorney will spell that out.

We had the same situation and our attorney advised us to work with the IRS which we did. We called the main IRS number and were referred to the BK section of the IRS in our area. They explained to us that you cannot have two payment plans with the IRS as they consider the Chapter 13, with back owed federal taxes in that plan, as a payment plan with them and, therefore, will not accept another installment plan if submitted. They will work with you to voluntarily send in payments of what you can afford monthly. We sent in $50 per month until our owed taxes for the year 2004 were paid - we only owed about $1700 but that's a lot to owe when you are in a 13. We paid it off and they eventually sent us what we owed in interest and penalties during that period of time. Note that if you receive a tax refund for the next year and you are still paying on those taxes, you can be sure they will keep the refund to pay off or pay towards whatever is due and owing at that time.

It's best for the rest of your Plan to figure out your taxes so you either end up owing a little each year or get a small refund back. You are obviously not having enough withheld. Best of luck to you...