Next years tax refund

[laurannm]

Our 341 was yesterday, and I was thinking last night...and i am sure I am getting myself worked up over nothing, but I thought it odd that the trustee made a note on my paperwork about how much of a refund I expect to get NEXT year. My lawyer said he would have no legal right to go after it, but I wonder why the trustee made a note of it? We filed July 10th, so is it possible that the trustee will hold the case open and go after our refund next year? We are expecting around $6k for a refund (I already maxed out my exemptions but only recently).

Thanks

[JollyGG]

Since you filed in July the trustee could be entitled to 1/2 of your refund. Usually trustee's are interested in refunds at the end of the year when you will be getting the refund within a couple of months and they are entitled to a big % of it and in the spring when many people are just getting their refunds. This time of year not as many people have issues with the trustee taking a tax refund. However, there is a really easy fix to this problem.

Change your exemptions and have a bit less taken out of your check the next several months. Make your refund as low as possible. It is actually a wise move to do this even if you aren't in bk. But in this case you might as well get that money in your pocket each month instead of in a big check next year. If you normally use your refund for expenses like property taxes, plates for the vehicles, and insurance. Just make sure to use the extra money you have coming in each month to create a saving for those types of expenses.

For some help on figuring out how to adjust your whitholdings to get your refund as close to zero as possible visit http://www.irs.gov/individuals/artic...=96196,00.html

I wish I'd done this. We filed in October so the trustee was entitled to 10/12 of our refund. We were able to exempt most of it. But we did loose some of it to the trustee.

[laurannm]

I did already max out my withholding, but only made the change recently. I forgot about exempting it...i think we do have enough room to cover it

[JollyGG]

(I already maxed out my exemptions but only recently).

Sorry. I misunderstood the above line. I thought you ment you had no more exemptions to cover it in your bk. Not that you had already changed your withholdings.

It sounds like you are already doing everything you need to do. I would guess from your lawyers comment that he is confident he can exempt it if the trustee does go after it.

I didn't change my whitholding because we had thought we had enough exemption to cover the whole thing. But then the trustee went ofter earned but unpaid income. Since we filed two days before payday and I only get paid once a month that was a big chunk of change to have to cover with exemptions which left part of our income tax unprotected.

So I would advise maxing out your withholding even if you think you can exempt it. Doing both won't hurt anything. But it sounds like you have already done that.

[RK05]

Won't that make your income go up by taking that money on your check rather than a refund? Will that change (hurt) a persons means test by much?

[JollyGG]

Won't that make your income go up by taking that money on your check rather than a refund? Will that change (hurt) a persons means test by much?

You need to change your withholdings after you file if you are that close on the means test that it would make a difference.

[laurannm]

No problem, I was using the wrong terms

If the trustee was interested, would they typically mention it to you during the meeting?

He also wrote down what we paid in total excise tax each year, which I thought was strange....

[laurannm]

Worst case scenario, if the trustee did want our tax refund next year, does that hold up discharge, or do we still get the discharge and it just holds up closing of the case?

[Cali]

My trustee didn't ask about our tax return. We only got 285$ back for Federal and owed state. And we filed taxes way before we filed.

I wouldn't worry about the tax return, whatever happens will happen.

I doubt it will hold up discharge, it might hold up closing case though.

[hrh25]

i do not think the trustee will say anything but the US trustee might. I am in Northern Virginia area and have been told by a few lawyers if you are getting a large refund each year the US trustee might see it as disposable income. I.E. $6,000 divded by 12 is $500 of disposable income that can be used to pay back the creditors.

I am not sure if everyone practices this but they do in this area and i had to change my exemptions so i will not get anything back. The lawyer had mentioned that while you can exempt the refund you can not change the fact that it is disposable income, so i just changed my exemptions.

Are you over the medium income for your state also? Thats one of the problems i have, plus my debt is well over $100,000 so i think when i file the US trustee will be going over it carefully.

Regards

HRH

[laurannm]

We are above-median, but our area (MA) doesn't count tax refunds as income on the means test (as long as you properly using your actual tax obligation in the calculation, and not just your withholding).

On our schedule I, we included a pro-rated amount for tax refund ($500 monthly) as part of our income calculations (and we are still negative by $200).

Our debt is also over $100k but the UST was not present at our 341, and our lawyer said this was a good sign (meaning it was unlikely they will get involved). So we are keeping our fingers crossed...

[Pinkie86]

How large of an amount would a tax refund be for someone to have to worry about losing?

For example, mine is small potatoes comparred to Laurann; I'll probably get maybe $1000 all together if I'm lucky.

[hrh25]

Then you have already crossed your "T"s and dotted your "I"s so you should not have anything worry about. I am sure you will not have any issue's, i hope mine goes smoothly when the time comes. As easy as it is to say, but try not to read too much into what the trustee noted etc. I think you have everything covered and seems like you had a good lawyer also.

Regards

HRH

[liz417]

Hi Laurannm,
I think you are 'thinking' too much The 341 is over and all that stress for nothing, now you've 'thought' of something else to stress about!!! Relax, you are officially in the 60 day club!!! Almost over!!!!

[laurannm]

I know, your right....it's in my nature to read into everything