W-2 question

[toomuch]

Am I correct in assuming that any income tax refunds are to be handed over the the trustee after a Chapter 13 plan is in place?

If so, how soon before filing should one increase the number of dependents. Now, DH is filing M-1. Would it make sense to go ahead and change that to M-2 now, even if we are not planning on filing until April or May of 08 at the earliest??

Thanks,

Toomuch

[RickInMich]

I'm interested in this, too. A co-worker and I were talking about our paychecks yesterday, and he was paying substantially less in taxes than I do. He's married, no kids. I'm married, soon to be four kids. So I go to payroll and find out that somehow my W-2 is single-one expemption. So I changed it to 5. But now I'm wondering if I better call her right away Monday and change that back. I don't want anything to look inappropriate.

Rick

[rrockinggramma]

in Michigan, chapter 13 refunds for the Federal go to the Trustee, but any state refund is yours to keep. My trustee is David Ruskin in the eastern district and all trustee's are operating under those rules. I changed my deductions, upped it so that I owe the Federal like 25.00 each year. No refund to the trustee for me. I get to keep my state refund which is nice.

[lrprn]

Am I correct in assuming that any income tax refunds are to be handed over the the trustee after a Chapter 13 plan is in place?

This is completely dependent on the customs and practices of your bankruptcy district and your trustee. The law does not specify what is to be done with income tax returns in Ch 13, so each trustee is pretty much free to do what they believe is correct with tax refunds.

A few trustees don't want to see your tax returns every year and don't take your refunds no matter how large they are.

The vast majority of trustees want to see your tax returns every year and will take some or all of the refund.

Our Ch 13 trustee falls in this last group. He will allow us to keep any of our total tax refunds under $2000 - he takes anything beyond $2000. We have adjusted our withholdings accordingly to ensure we don't get more than $2000 back total, but also don't go negative owing taxes. I check that every quarter to make sure we are still on target - so far, so good.

You HAVE to know the customs of YOUR TRUSTEE around tax refunds to know the right answer to this for you. Whatever happens to another Ch 13 filer is no guarantee the same thing is going to happen in your case.

Ask your lawyer what to expect from your Ch 13 trustee. It's the only way to get a reliable answer for yourself.

[B12]

I can't keep my mouth shut any longer on tax deductions. LOL Bear in mind, I am Italian!

I have seen this addressed a few times on the board and have bitten my tongue as I do in real life when people tell me "proudly" how much tax refund they are getting.

So, you give your money to Uncle Sam every paycheck. He holds it for you paying no interest. Then, at the end of the year, he GIVES you your money back and you pontificate about what a wonderful refund you got.

Insanity!!!

Raise your tax dependents with your employer immediately. It does not matter that you claim 6 and only have one kid. Consider yourself, your spouse, your children, your mortgage, any large medical bills, etc. a dependent.

The most ridiculous answer I get when I suggest this to people is....I like getting a tax refund, its like saving money.

Well then, take the money Uncle Sam would be saving for you and put it in a savings account bearing interest. At tax time, withdraw your money and voila......you have a savings that has collected interest for a year.

I have never had less than 12 dependents. Now, do not go crazy unless they are warranted. You need to find the fine line between dependents and breaking even on taxes at the end of the year. But, I guarantee that most people can raise their dependents by 2 and have no tax ramifications at the end of the year. The number you claim has nothing to do with how many children you have.

I am not an accountant, I am certainly not a lawyer. This is an opinion based on life experiences, so do what you want with my advice.

[JollyGG]

http://www.irs.gov/individuals/article/0,,id=96196,00.html

Here is an IRS calculator to help you figure out how many to claim to grt your refund as close to 0 as possible.

[B12]

Nice find Jolly!

[CindyLou]

wow...that's REALLY cool! I may not be as bad off as I thought on my taxes for 07! I had changed my withholding after my BK to keep my refund from getting taken in 06 (which ended up not being a non issue) and never changed it back and then didn't get my taxes done for 06 (have my appt tues) and now just changed my withholding to zero so that I can get back on track and not owe (hopefully) as much this year....according to this calculator....if I keep my withholding at zero I will owe less than 25.00! Thanks for the peace of mind!! When it comes to taxes I always go STUPID...uhhhhhgggggggggggg!!!!!!!!

[nervousnellie]

B12
I was a tax preparer for many years and like you I always tried to get people to handle their own savings by adjusting their W4.Some took the advice,but others let the IRS pay them back at tax time and on top of that they would waste hundreds on the Refund Anticipation Loans to get their own money back quicker. A lot of these were high income people. Most who qualified for EIC knew they had to have a certain amount of withholding to qualify for those loans so they wanted to be sure they could get a quick refund also.On the other end the late March and April filers who owed would pay big bucks for the loans to pay their taxes owed.All of these scenarios could have been avoided by filing a correct W4 and a W5 for the advance EIC( for those who qualify)Most people don't even know you can adjust those during the year or how to go about changing them.It also amazed me how many could not file their own simple forms and save themselves big bucks.There are several free programs available that will walk you through step by step and many places that will prepare the forms for you based on income.I learned all this and more by taking a tax class for a hundred bucks and have saved myself and others thousands since then. And don't be so sure all preparer's are filing your returns accurately or giving you the deductions,credits you are entitled to. I saw a lot of mistakes (have to admit I made some myself in my early days).People who have filed Bankruptcy scare the hell out of most preparer's because they don't understand the tax laws.I have seen where the preparer's are adding income because someone filed BK. and had their debt discharged.Fortunately it was caught within the 3 yr. period for amending.
Sorry for rambling,but taxes are a subject dear to my heart.

[MajorMike]

I do our own taxes with H&R Block online. I have for the last 3 years. It's so easy, you can print off your own records, and they have help waiting if you need it.
I hardly ever get a refund because I do exactly what Nervous said. It makes 100 percent perfect sense.

[JollyGG]

Nice find Jolly!

Actually, the link can be found under "Links for members" in the General bankruptcy section.

I had used it before coming here, however I don't want to take complete credit for it.

[MajorMike]

Thanks for that link Jolly. It was cool to do even though I'm right on track. I sent it to a few friends.

[doglover]

I was told by my attny that I'll get my refund check just how I've always gotten it. At one time people had to write the IRS requesting it be mailed to them and not the trustee but Texas dosen't do that anymore.

[MajorMike]

I was told we can keep ours too, if we have one.

[rrockinggramma]

however in Michigan, in a chapter 13, which I was assuming RickinMich is from, cannot keep his federal refund. Those are Michigan's local rules. I was responding only to his post, not to everyone elses. I realize that local rules govern tax refunds and everyone is different.