Owing Taxes while in Chapter 13 - options to pay?

[anunezal]

Hi, I am starting my third year in Ch13. I am in a 100% payment plan. While doing my taxes, I found out that I have to pay a big amount $18K. Previously I always got a refund, first time every happen to me. Looks like my new employer (just started in 2021) didn't took enough taxes from my paycheck.

I was wondering what are my options. This is so far what I look at :
1. I look at the IRS webpage and the offer a payment plan. I don't know if I qualify as being in an active CH13.
2. Take a loan from my 401k To pay the taxes
3. I read that it may be added to the CH13 payment plan. As I am in a 100% plan, I hope it can be added just to my monthly payment for the next 2 and a half years.

Does anyone know if this options are really feasible?

I just went to my employer and changed my W4 Form, so they can hold more taxes for next year.

Thank you

[justbroke]

Hi, I am starting my third year in Ch13. I am in a 100% payment plan. While doing my taxes, I found out that I have to pay a big amount $18K. Previously I always got a refund, first time every happen to me. Looks like my new employer (just started in 2021) didn't took enough taxes from my paycheck.

Ouch!

1. I look at the IRS webpage and the offer a payment plan. I don't know if I qualify as being in an active CH13.

They probably won't do that while you're in an active Chapter 13.

2. Take a loan from my 401k To pay the taxes

This would likely require permission.

3. I read that it may be added to the CH13 payment plan. As I am in a 100% plan, I hope it can be added just to my monthly payment for the next 2 and a half years.

This is possible if you could get the IRS to update or file a claim and have it paid as an administrative expense.

I have no experience with any of these options. I filed Chapter 13 to deal with IRS taxes, and didn't have any tax-specific issues while in the active Chapter 13.

I just went to my employer and changed my W4 Form, so they can hold more taxes for next year.

This is good.

[Carmella]

From my personal experience you can make voluntary payments. This is something I have to do every year, but our taxes are usually in the $2,000 range. You can pay online, but you WILL NOT qualify for a payment plan.

If you call the IRS bankruptcy department they can give you very good advice. You can search the IRS website for that phone number (we are not allow to post phone numbers on this board). Calling the regular IRS number was a run around and they gave me a different number for BK dept.

I would call the IRS and get info about voluntary payments and then since it is larger amount and then I would contact the attorney. Maybe you can just make voluntary payments to pay it off instead of going back through the trustee and changing the payment amount that would save a lot of hassle.

The IRS will charge you interest on the taxes. I don't know if that is different if going through the plan. Contacting the attorney will help you find the best way of doing it. I suggested to call the IRS first just so you can get knowledge of how that works, but 18K is a large amount and different than my situation.

[brokenurse]

This happened to me in my second year. 7k. While they were not happy about it, my lawyer asked my trustee if it could be added to my plan and they did it because there really was no other option. We didn't have a spare 7 grand (it was a surprise to us too) and the IRS would not allow a payment plan through them.

[98daffodils]

Thank you all for these replies (and thanks to the original poster as well). I am in the same boat. First year in a Chapter 13 and I just found out I owe $6100 to the IRS and $981 to state. I didn't expect this - I have two kids, divorced, but my ex gets to claim one since we have 50/50 custody (despite my providing more than half of their support). Also, my employer didn't take enough taxes out (they are not sure what happened - although I think it is because I am head of household and they took that rate instead of single, but I will be changing this so it doesn't happen again). I haven't heard back from my lawyer yet, but I will definitely contact the IRS BK office. It is impossible (or nearly) to save any money while in a Ch 13... no idea how they expect people to pay these large amounts upfront.... I am surprised there isn't some sort of tax break for bankruptcy... I am hoping the trustee will let me roll it in.... if he doesn't then I guess voluntary payments are my only option?

[anunezal]

Thank you for all your comments. Just a correction from my first post. I miscalculated my taxes, and I don't have to pay $18K, it is $8K. Still a big number, but much better than $18k. I spoke with my lawyer, and he told me very similar comments as everyone mentioned. So for me looks like the best option will be to take a 401K loan, but still need Court approval.

[Carmella]

8K is definitely better. Honestly I feel like when they calculate our BK payment they do not take into account the taxes we will have to pay!

[TheStiker469]

I was able to add mine into the plan. The lawyer had a nominal fee, $350 or so, for the filing and updating the matrix, but that fee was also added to the plan.

[womanonfire]

If this happened to me, I would try to add to the plan. No interest and keep your savings. I think it would be worth the fee charged by the attorney.