When Would I Know (Income Tax Return Question)

[BkinTX]

No one shout at me, please! I have searched the forums and haven't found the answer to this specific question. My apologies if it's a repeat.

When would we know if the trustee is going to take future income tax returns?

Our 341 was in June. PACER says the trustee says we have nothing to distribute and he is finished with the case. We are 20 days from discharge.

Is confiscation of our 2010 ITR a given? Would we be notified? If it IS a given, how many ITRs would be taken?

Since it hasn't been brought up, is it likely that it's ours to keep?

TIA

[JRScott]

I suppose it depends on the amount but 2 years ago when I had my case having my 341 in early July the Trustee never took my return.

It is generally when you file in the 3rd quarter or 4th quarter that they look at it more closely.

[BkinTX]

Ours is usually substantial -- on the order of 7 or 8k.

I am happy to be rid of our debt regardless, but I would love to have my ITR to pay off my student loans.

[eddiep]

I just filed a couple days ago and because of this forum I asked my attorney if we should use the last of our exemptions to protect next year's return. He said no the trustee will not take it. He probably thinks I am a jerk because I kept questioning whether he would try to take half of it because it is July, he said no we are all set. But I think this is another situation that it depends on your local bk rules and customs.

[lrprn]

Our 341 was in June. PACER says the trustee says we have nothing to distribute and he is finished with the case. We are 20 days from discharge.

If your trustee was going to take half your 2009 tax refund, he would not post on PACER that you have nothing to distribute. Looks like you should be ok. Check with your lawyer to be certain.

[OhioFiler]

Ours is usually substantial -- on the order of 7 or 8k.

I am happy to be rid of our debt regardless, but I would love to have my ITR to pay off my student loans.

Loaning the Us Treasury $600-$700 interest-free each month then requestng it back the following year is not the best financial strategy. You could be applying that $600 to your student loan balance each month and reducing your interest expense.

I have a question for you. On your Schedule I did you use the amounts on your paychecks for line 4.a. Payroll taxes and social security or did you use what was on your IRS 1040 plus ss and state and local taxes?

[BkinTX]

We get tax credits (EIC, child tax credit, etc). That's why the amount is so large. We certainly don't pay $600-$700 in federal taxes each month, LOL.

I have no idea about the payroll taxes because DH and Finance handles that.

[BkinTX]

Oh and thanks, lrprn, for such a clear, direct answer.

[OhioFiler]

We get tax credits (EIC, child tax credit, etc). That's why the amount is so large. We certainly don't pay $600-$700 in federal taxes each month, LOL.

I have no idea about the payroll taxes because DH and Finance handles that.

Then you should not be paying any federal taxes on any paycheck.

[BkinTX]

What does that mean? Could you clarify, please?

[Naomi]

Basically, he's saying that if you get those credits...you're not making enough money for your household size to be paying any federal taxes.
I think you have more children than I do so your husband should be claiming a higher number of allowances.
For ex, there are 3 of us and my husband claims 3 on his paycheck and pays no federal taxes. When he was claiming 0 or 1, taxes were taken out.

[JRScott]

It depends on your work and state BKinTX.

Many employers will not allow you to opt out of payroll taxes completely. However you can claim extra exemptions etc where you can reduce what is taken out in payroll taxes if you haven't done so beforehand. Even then you probably won't eliminate a tax return entirely since you get it mostly through EIC and child credits.

[BkinTX]

Our federal taxes are a whopping $48/month. DH is military and Finance ONLY deals with him. If I am reading his LES correctly, he is claiming 3 exemptions, which I believe can't be changed during bk.

[OhioFiler]

It depends on your work and state BKinTX.

Many employers will not allow you to opt out of payroll taxes completely. However you can claim extra exemptions etc where you can reduce what is taken out in payroll taxes if you haven't done so beforehand. Even then you probably won't eliminate a tax return entirely since you get it mostly through EIC and child credits.

If you claim 9 exemptions you're usually pretty good. If you claim 10 or more your employer is required to make a report to the IRS each quarter.

[JRScott]

Yeah that won't make to much difference. Still after discharge you might have him look into it and see if he could up his exemptions to keep from having it took out. Could help in post bk budgeting, I"m not sure of the military's policy on this though.