Guidance on W2g and a separate IRS Goof that triggered a refund payment

[PurpleDiva]

Hey, all. So I have two unrelated issues, both dealing with IRS/Taxes/Trustee that came up in the last couple of weeks. My plan was confirmed 12/2019, everything has been smooth sailing since then. I feel like the general advise will be to just contact my lawyer, but if there are easier ways to resolve/not force this up the food chain, I'd like to do so.

Issue 1:
I went on a trip to the casino a couple of weeks ago and won two different jackpots that will trigger W2-Gs (I have no issues with gambling, I went on a trip, swung by the casino to have a bit of fun and had amazing luck); one jackpot was $1,500, the other was $3,700. During my meeting with my lawyer last year, I asked her do raises/promotions/base pay increases need to be reported to her/trustee, and she said not to worry because my trustee/district doesn't tend to make a big deal about it. The reason I ask, is the amounts of those jackpots could have easily been the same amount as a small promotion at work for me. Considering they are comparable (as I will have to pay tax on the amounts like reg income), do I need to get in contact with my lawyer/trustee to discuss it?

Issue 2:
I had both IRS and State Tax debt included in my filing. The trustee made the priority payments to them monthly starting in Dec 2019 and those debts were completed by May. However with Covid hitting hard in March, checks from March/April/May were not posted by the IRS until just recently. Last week I received 2 checks in the mail from the IRS and after logging into my IRS account, it looks like they double posted a large payment of $3k to my IRS account, which triggered the checks to be sent out. I know the money is not mine to keep, but I know the IRS can be a cluster, so I want to make this resolution as easy as possible.

So my in terms of what to do I figure I can either do:
A: Call the IRS directly, tell them they made the mistake and just deal with them myself?
B: Sit on the money in my savings (and make a little interest int he mean time) wait until they figure it out and just send it back then?
or
C: Send it to my lawyer/trustee and have them work on it, although from the trustee's PoV, they've done their part, no double payments are showing posted on NDC.

Thanks for any thoughts or comments you all might have.

[justbroke]

Welcome to BKForum!

1. Issue 1: this is an issue because you already filed. It is actually income and unless you're in a 100% Plan you pledged all "disposable monthly income" DMI to the plan and are to surrender it to the custody and control of the Trustee. You should contact your attorney immediately and ask them how to proceed. This is only a public service announcement, but gambling while in an active Chapter 13 is a bad thing. If you have a gambling habit, as I did, you need to get that out of your system and do not gamble at all. A Chapter 13 will never fix a gambling problem. End of public service announcement.
2. Issue 2: you should contact your attorney immediately. This is not an IRS issue as the IRS already properly did the right thing. There was an ovrerpayment (the extra check(s)) and the IRS refunded that amount. The issue is with the Trustee. Your attorney will likely have you endorse the check and forward to the Chapter 13 Trustee. (Some Chapter 13 Trustees do not like third party endorsed checks, so they may have you deposit the money and then send the Chapter 13 Trustee certified funds once the check clears.)

You really need to speak with your attorney because you have two issues that need attention of the attorney. You need their advice on the gambling income and its impact on your plan. You need to them to coordinate returning the overpayments back to the Chapter 13 Trustee.

I hope that helped.

[PurpleDiva]

justbroke Thanks for your response. All of your info I've read up on the board has been super helpful. I'll contact my lawyer on both issues. Also, I know you were giving a PSA for anyone that comes across this post, but I don't have a gambling problem. I agree, if someone has a habit/problem, abstaining is critical. I went with a very low and absolute budget ($200). (BTW, the money came out of my gas savings from WFH all these months of covid).

On issue 2, I wanted to clarify, It doesn't appear to be two payments sent by the Trustee, but the same payment posted twice on the IRS side.When I go to account ledger on NDC site, I see a check payment and the exact check number, and it is only shown once. On the IRS side, I see the payment and the exact amount showing twice (no check number to reference unfortunately).

My trustee doesn't have a problem with personal checks ( I had to remit my annual bonus earlier this year via check) so depositing the IRS checks then writing a new one will be what will happen.

Thanks, PurpleDiva

[justbroke]

Yes, I understand that it doesn't "appear" to be a duplicate payment because you're looking at NDC. It doesn't mean that your Trustee uses a different system. (All Trustee data gets reported to NDC, but Chapter 13 Trustees across the land use other systems that may feed into the NDC. For example, TrustWin is popular with some Trustees.)

I'm not addicted to gambling, but I do get gambling fever once in a Casino. I do have an absolute limit set, but it's usually higher than my "I'm only going to spend $200" and then saying "well, my absolute limit is $1,000!" It is certainly fun and I only gamble when I'm on a cruise. I avoid the casinos. I play PowerBall and Mega Millions. But $10 here or there won't break me.

[flashoflight]

Did your confirmation order say anything about revealing additional income other than submitting tax returns? If so, follow the instructions. If not, don't do anything for now. You have attorney client privilege so your attorney should stay quiet if you need to talk about the trip to the casino.

Schedule 1 asks what the income was. Under normal circumstances, you'd call it "gambling winnings" and if the trustee sees it, it will cause trouble for you so you should not spend any of the winnings. Be prepared to forfeit the entire amount net of extra taxes paid to the trustee for the benefit of your unsecured creditors. My Turbotax PDF files don't include W-2 so maybe it doesn't include W2-G as well.

If you claim itemize gambling losses and the trustee sees it, you may be inviting a whole lot of trouble. Most people with W2-G don't pay taxes due to losses.

I agree gambling is bad. If the main purpose of the trip was to visit the casinos, I would quit doing that for the duration of the 13.

Go ahead and play Powerball very occasionally for entertainment if you want. If you win the jackpot, your trustee and unsecured creditors win as well.

[PurpleDiva]

Quick update, contacted my lawyer and she was able to get the ledger of payments made from the trustee, and it does not show multiple payments from them. She advised me to contact the IRS and work with them. Since there doesn't seem to be an issue on the trustee side, she said no need to involve them. As far as the winnings, she is checking to see If the amount will trigger the district threshold.

flashoflight
My case had a specific provision for my annual bonus. I have to remit that via check every year. When I look at what I submitted to the trustee this year, the only schedule it had was Schedule D-Capital gains/losses. From what I can tell, W2G is lumped in with regular earnings on Line 1 of the 1040. No plans to itemize, and I put it all in the bank. I'm taking no chances of putting myself in another/deeper hole. s/n-The casino was not the main purpose of the trip. And heck if I were to win the POwerball, I'd dismiss my case, pay everyone off and disappear hahaha!

justbroke
The link on the bottom of the pdf she sent me said 13network.com, so I'm not sure if that's the name of the system or is just what she uses to see it, but what my lawyer sent was def from the back end of things. As far as how much, The one time I took >$500, it about made me physically sick, so no worries about going to those amounts LOL.

But I definitely understand the casino advise from both of you and will take this as a lesson going forward.

[justbroke]

Yes, 13Network is a different Chapter 13 Trustee system. Some use 13Network and others use TrustWin and still other systems. They all feed into the National Data Center (NDC). I thought, maybe, the feed was broken and that the actual system (13Network in your case) did show the duplicate check.

I'm glad that your attorney took a deeper look into this.