6 month income lookback

[okane]

Hello, I am wondering, I plan to file bankruptcy about June, is the tax refund I got in February gonna be part of my 6 month income for means test calculations?

[momofthree]

No, it's a refund of money you paid. It's already been counted since the means test uses your gross income.

[coolmom04]

Hello, I am wondering, I plan to file bankruptcy about June, is the tax refund I got in February gonna be part of my 6 month income for means test calculations?

Well, for us, we had to take the refund amount and divide it by 12 and decrease the tax amount that is taken from the paycheck on the means test to compensate for the large refund b/c technically, we COULD be getting an additional $299/month in gross pay. It didn't hurt us, but we did have to do that.

So basically, according to pay stubs, we have $1379/month taken out for taxes, but b/c of our large refund, we had to adjust it on the means test to say $1080.

Does that make sense? BUT - the actual deposit of the refund money does not count as income - like momofthree said

[lalap123]

In my state an income tax refund DOES count as income. I'm in Georgia and was told this by every attorney I met with. Of course I respectfully disagree with this and would have preferred to have received my return and spent it on living expenses prior to filing, but it would have pushed me over the median by several thousand so I had to go ahead and file BK prior to filing taxes and getting my refund.

I would definitely ask attorneys in your area before you assume that it doesn't count.

[coolmom04]

In my state an income tax refund DOES count as income. I'm in Georgia and was told this by every attorney I met with. Of course I respectfully disagree with this and would have preferred to have received my return and spent it on living expenses prior to filing, but it would have pushed me over the median by several thousand so I had to go ahead and file BK prior to filing taxes and getting my refund.

I would definitely ask attorneys in your area before you assume that it doesn't count.

Ouch! You know, I just don't understand how every district/state can have their own rules.. it just doesn't make sense!

Do you think it kind of has something to do with why we had to decrease the amount of taxes paid on our means test to compensate for the refund? Since that was essentially income we SHOULD have been getting? It sounds like it's kind of along those lines. Except, if that were it - wouldn't they ask to see your taxes and anticipated refund and use that against you even if you haven't received it yet?

We changed the W4 to compensate for all this, so now we'll get more $$ each month and no big refund.

[Meatstick]

Seems like your being penalized for income already earned if its being counted as income a second time.

Doesnt make any sense at all, but then again nothing really does anymore.

[BCA2009]

Seems like your being penalized for income already earned if its being counted as income a second time.

Doesnt make any sense at all, but then again nothing really does anymore.

The issue is that when you complete the means test you start with gross income and subtract expenses. One of the allowed expenses is taxes withheld from your paycheck. If you withheld enough to get a refund at year end, then you really over withheld which made your disposable income appear lower. By adding back the tax refund, they are basically adjusting your disposable income to what it would have been if you had you withholdings calculated correctly to begin with. But you need to make sure you divide your Refund by 12, not 6. The refund is the result of over withholding for the entire prior year.

[Meatstick]

Yeah that does make sense. I think what others have posted is what doesn't make sense and they are probably talking about additional DMI not additional gross income.

[HHM]

Correct, the distinction for tax refunds is gross vs. net income. A tax refund DOES NOT increase your gross income, but it does increase your net income.