could this be an alternative to save tax refunds?

[screwedupbyRE]

someone suggested me and I thought I'll share and get your insight. this is alternative to save tax refunds from your interest/mortgage payment.

step 1. File taxes and don't mention the interest paid during the yr. you'll get relatively small refund. hand over this tax return to ust.
step 2. after 2-4 moths, file amendments to your tax return and claim refund on interest payments.

would that be illegal or wrong-doing? what if someone actually forgets to claim refund on interest payments!!!

[HHM]

Yeah, that is bad on so many different levels, I am not sure where to begin.

Also, what "interest" are you referring too.

[screwedupbyRE]

I was referring to "interest only" monthly mortgage payments.... you generally get 1/3 of the interest back while filing taxes... say if my total interest payment for the yr 2008 was $30,000, I'll get back $10k as tax refund.

[Trixie007]

Yeah, that's pretty wrong. No one "forgets" to deduct their mortgage interest on their taxes. If you file BK and own a home, when the Trustee looks at your tax returns, they know that there should be a deduction there for the interest paid. If the amount you're having discharged is higher than any monies you can't exempt, that seems like a pretty good deal without doing anything fraudulent.

[NancyLou]

I would say this is a slippery slope myself. While it doesn't "feel" like fraud, an amended return is easily explained as, "I didn't have the necessary paperwork until now." to knowingly do it to keep it out of the hands of the person who is in a position to cancel your BK because you peeved them sounds dishonest to me. I wouldn't want something like an income tax return to come between me and financial stability.

[screwedupbyRE]

not sure what you meant by <<If the amount you're having discharged is higher than any monies you can't exempt, that seems like a pretty good deal without doing anything fraudulent.>>

also, I had my 341 yesterday. trustee didn't ask about the refunds I last year, or any more I'm expecting this year. Though he saw my tax return and a refund of $13k.

is it expected that it's your responsibility to turn over the refund to trustee even if he/she don't even ask for it?

[StartingOver08]

I would think that the Trustee would notify you (your attorney) if they want your refund at some point by letter after the 341 if they did not mention it at the 341.

However, when you get your refund, I would not spend it until you knew for sure the Trustee did not want it, just in case.

[Trixie007]

not sure what you meant by <<If the amount you're having discharged is higher than any monies you can't exempt, that seems like a pretty good deal without doing anything fraudulent.>>

I just meant that if you have a 12k tax refund (that you can't exempt) that the Trustee might take, and you are filing BK on more than that...say, 50k (or any number really), I wouldn't risk my discharge of all that debt to try to hold on to the 12k. Basically what NancyLou said, don't do anything to tick off the person who holds your financial clean slate in their hands. Of course, I realize that this is a hypothetical, so my answer is aimed at the question, not at you!

[HHM]

Ok, I see what your saying...

My first statement is still valid, this is wrong in many ways.

1. IRS, you have no good faith basis for omitting the interest deduction since the interest is reported (i.e. frivolous return...bad)
2. Legally, it doesn't matter, the refund is earned on Dec 31, 2008. It really doesn't matter when you file your taxes, the BK estate is still entitled to it (unless there is an exemption).
3. You are intentionally trying to shield an asset from the BK estate...we are now talking about BK fraud that would result in denial of discharge (meaning, you can NEVER discharge the debts that were included in this BK).

Don't do this...

[bmcmull]

someone suggested me and I thought I'll share and get your insight. this is alternative to save tax refunds from your interest/mortgage payment.

step 1. File taxes and don't mention the interest paid during the yr. you'll get relatively small refund. hand over this tax return to ust.
step 2. after 2-4 moths, file amendments to your tax return and claim refund on interest payments.

would that be illegal or wrong-doing? what if someone actually forgets to claim refund on interest payments!!!

The better idea would be to claim standard deductions for the years you are in your BK. You have 3 years after the return is filed to amend your taxes. So depending on the lenghth of your BK, you could in theory file an amended return after the BK discharges. I would not however file the amended return while in BK or file 2-3 at one time, I would do it only after discharge and probably one a year. NOt sure that the trustee could do anything after the discharge is filed. This is not a proven theory though and is only speculation on my part

[bmcmull]

AS far as being wrong on a lot of fronts, nothing is more wrong than the laws governing trustee's and atty's. It is a crap shoot out there and they make up their own rules as they go.

[Granny]

For what it's worth, even if you file using the standard deduction and later amend and get the refund, if you are still in a Chapter 13, the IRS will send the amended refund to the Trustee. Then you are subject to the local trustee rules for tax refunds that exceed whatever standard he has set. In my jurisdiction, that is $2000. Anything over that, the trustee keeps. At least that's how it works in my jurisdiction, refunds go to the trustee first then to me.

[bmcmull]

Anything over $2k, he keeps the whole check or just what is over 2k ? I filed our taxes this year and the return was $1850.00 , however the IRS added a stimulous payment for one child that I did not get last year and it changed the return to $2200.00. It will come in one check and this put me over the $2000.00 mark that we have in Texas, even though $300.00 of it is a stimulous payment. STill waiting on the answer, but the IRS says it is within our limitations and would be mailed to me..........I am not optimistic.

[Granny]

Anything over $2k, he keeps the whole check or just what is over 2k ? I filed our taxes this year and the return was $1850.00 , however the IRS added a stimulous payment for one child that I did not get last year and it changed the return to $2200.00. It will come in one check and this put me over the $2000.00 mark that we have in Texas, even though $300.00 of it is a stimulous payment. STill waiting on the answer, but the IRS says it is within our limitations and would be mailed to me..........I am not optimistic.

Yes, he sends the 2K, and keeps any amount of that. However let me add this additional info. For 2007, we had not only stimulus money but a large refund due to low income in 2007. This all came close to 5,000. I spoke with someone at the trustee's office and she suggested I fax the tax returns and a letter requesting the entire refund. I did as she suggested, I gave GOOD reasons as to why we needed that money. I also explained the source of the money was stimulus and earned income credit due to the low income yada yada yada and I got the entire refund. Thank you Mr Trustee.

[bmcmull]

In 2005 I filed a return that was to be around $4000.00, according to the letter from our trustee anything over 4k was autimatically taken anything under 2k went to us and anything in between had to have a good explanation. THat year I had to pay for a couple of operations for my twin daughters, nothing major just a hernia and tonsels, but the trustee said I would have to file a motion. To make a long story short she took all 3800.00 from us and we are still paying on those operations. Lucky for us my wife is a RN at the hospitol so we have it payroll deducted. She took all 3800.00 ........