Tax bank account --more questions

[anuta]

Accounts receivable

I have a separate tax bank account that I set up a year ago. When I receive payments from clients I deposit the portion due to state, federal estimated & employee taxes as well as gross receipts. Since I am "saving" it in this account and then paying each quarter or monthly (depending on the tax) How does this get handled in BK? For example, we will be filing in Aug. My quarterly tax payments would be due in Sept. Will the trustee take that money that I have saved to pay taxes. It's not my money--it belongs to the various tax agencies. If the trustee does take this money, do I just go delinquent on that quarters tax? The account was never used for anything other than taxes.

Startingover08 posted this response:
2) Tax issue. People that have funds set aside to pay their income and sales tax must pay those funds prior to filing - or they will lose the $$ to the Trustee. If the funds are paid a little early the Trustee is not likely to go after the tax funds as taxes are a priority debt.

[diebroccoli]

:listeningintently: as this is nearly identical to my situation and i have the same concern

[StartingOver08]

I'm glad you started another thread on the subject. You will get more answers. The Trustee will NEVER say that you should have used a credit card.

The Trustee does not mess with the IRS. Having a separate tax account is the best way to handle taxes due. The best way to make sure the taxes are paid is to pay them before filing, because the Trustee will take the funds in your 'tax' account if you do not. Time your filing appropriately.

[anuta]

Thanks for answering Startingover.

I didn't think the trustee would suggest using a cc--instead, I was concerned that the trustee would look and see that I have two accounts, one that runs out by the end of each month and one that has tax money in it.

For example: This month I will have $50 left in my personal checking account. In my tax account I will have $500.

My question: Will a trustee look at this and say there is $550 left over in April and because of that ,or a similar money situation occurring each month, decide that I should be in a chapter 13?

Perhaps this washes out in the means test as an expense?

[StartingOver08]

It washes out in the means test as an expense.

[anuta]

Thanks. It seemed strange (as so many things do in planning for BK) that one might be punished for paying taxes.

[StartingOver08]

Thanks. It seemed strange (as so many things do in planning for BK) that one might be punished for paying taxes.

Just remember - you are really asking two different questions.

1) The tax expense is shown on your schedules so in that manner the expense is taken care of in the means test.
2) The actual funds sitting in the account MUST be spent prior to your filing date. The Trustee will not differenciate between a 'tax account' and a personal account.

That is why you must pay the taxes early if your BK filing date is prior to the due date for the taxes. Otherwise the funds go to the Trustee. Clear as mud??

[anuta]

I understand--maybe I can overpay 2Q estimated taxes--if I have enough. Or, maybe just be late in paying 3Q taxes. It's like a reverse universe. I think I am being responsible by putting away monies for taxes, in fact, I am serving as a pass through, but the way bk is constructed will force me into paying late. I'm engaging in good habits and yet must find a work around the good habits---now that is as clear as mud.

[diebroccoli]

I understand--maybe I can overpay 2Q estimated taxes--if I have enough. Or, maybe just be late in paying 3Q taxes. It's like a reverse universe. I think I am being responsible by putting away monies for taxes, in fact, I am serving as a pass through, but the way bk is constructed will force me into paying late. I'm engaging in good habits and yet must find a work around the good habits---now that is as clear as mud.

my head hurts

but i did just speak with my accountant and she said i can pay as many estimated taxes as i want. So, i will pay early and overpay Q2, then underpay Q3 and hopefully it all evens out in the end