NEXT year's tax refunds?

[WoodSprite]

This is an aside from another thread, but I wanted to ask about it more widely...

One thing that she did make an announcement about was everyones 2008 tax returns. NO ONE is to spend the money without her approval. If you do they will file criminal charges against the person.

YEs Laurannm, she is talking about the tax refund you would be receiving in 2009. I guess she is planning on leaving everyones case open until then? She said even though we would be discharged don't make the mistake of spending that tax refund without her permission!

Has anyone else had this experience? Does this make any sense at all? 6+ months after discharge on a ch7, what contact would any of us expect to have with our trustee? Or is this trustee actually intending to keep all these cases open? Whaaa?

[jessegirl]

Wow, I am shocked too. I thought once your case is discharged that - THATS IT!! Now they want your 2008 tax refunds?? What else?I could see if she was talking to chapter 13 then OK i understand. BUT THIS! HMMMMMMMM

[laurannm]

And another related question I was thinking about....

Lets say we get our discharge in Oct, but they do go after our tax refund next year. Right now DH doesn't work, but we are thinking about having him go to work after discharge. The trustee at our 341 specifically asked DH is he hwas returning to work in the near future (he answered not any time soon, no). So hypothetically, lets say DH goes back to work, and then next year we have to send in our tax returns so that the trustee can verify what our tax refund was. if he sees additional income from DH's new job, can he go back and revoke our discharge?

Probably a worst-case scenario but curious if it's possible...

[Keebler]

A couple of things bother me about this.

A Tax Refund simply means you had too much withheld from your pay and the refund is the adjustment that pays you back the excess. In this regard it doesn't seem fair to forfeit any excess tax that accumulated after the date you filed. However, I do see a potential for abuse where you could have your witthholding too high to help make the case for no disposable income and then recover those dollars at the end of the year as a refund. I guess they only way to protect against this form of abuse it to look at your refund at the end of the year.

The question in my mind is how to avoid getting anything taken away. The first and most obvious tool is to be sure that no more is withheld than absolutely necessary. This works great for most except for some of us who get a refund despite having nothing withheld. (I'll bet you didn't realize that our tax system refunds money even when none is payed in! It's supposed benefit low income filers but a family can be more than half way to a six figure income and still get money back after paying nothing.)

The other trick that I've considered is one where you file a tax return using less than the most favorable tax treatment. For example, a person could deliberately choose the Standard Deduction and pay more taxes as a result. The secret would be the fact that you have three years to go back and file an amended return and get your refund back.

[laurannm]

I think in this case we are talking about excess taxes that accumulated BEFORE filing, which technically makes them property of the BK estate.

[WoodSprite]

I think in this case we are talking about excess taxes that accumulated BEFORE filing, which technically makes them property of the BK estate.

Shoot...I guess that does make sense. But does that mean the discharged cases are routinely left open until after the following year's taxes are filed? I'd never heard that before.

[keepmine]

We're at that time of the year where, many trustees will want some or all of the 08 refund.
It's cold hard cash and is the property of the bk estate unless, you have enough exemptions to cover it.
If the refund is significant, consider delaying your filing until you have received the refund and spent it on necessities.
And to preempt an idea that'll get posted-the scheme of not filing your tax return until after the bk is discharged won't work. You'll get discharged but the case will not be closed until the trustee gets the refund. If you don't turn it over, the trustee has the authority to revoke the discharge.

[laurannm]

We're at that time of the year where, many trustees will want some or all of the 08 refund.
It's cold hard cash and is the property of the bk estate unless, you have enough exemptions to cover it.
If the refund is significant, consider delaying your filing until you have received the refund and spent it on necessities.
And to preempt an idea that'll get posted-the scheme of not filing your tax return until after the bk is discharged won't work. You'll get discharged but the case will not be closed until the trustee gets the refund. If you don't turn it over, the trustee has the authority to revoke the discharge.

Thanks Keepmine

Are you referring though to tax refunds received this year or next year?

[keepmine]

Refunds from your 08 returns. Any refund from 09 forward will not be affected by your Chapter 7 bk. A 13 will be a different story.

[HHM]

Yes, we are at about that time when trustee's start eye'ing tax refunds for tax year 2008 (the tax return is due April 15, 2009).

So, this does not surprise me.

[JRScott]

I think in this case we are talking about excess taxes that accumulated BEFORE filing, which technically makes them property of the BK estate.

Exactly and in the late 3rd quarter and 4th quarter of a year it is not unusual for trustee's to wait for the next years return.

[laurannm]

Thanks all

I am pretty sure that we have more then enough of the federal wildcard exemption to cover it, so hopefully we are ok. Sounds like it won't hold up a discharge either, which is good.

Lets say worst case happens and we can't exempt it and the trustee holds open the case, but we get our discharge on time. My DH is thinking about returning to work, should he wait until after the case closed sometime next year, or as long as we have our discharge, he can go back to work right after that?

[keepmine]

He can go back after discharge. Closing is just an administrative detail.

[laurannm]

Excellent to hear, thanks