Withholding

[jwmc1]

In my attempts to keep my creditors at bay, I had too many allowances claimed on my withholding. As such, I need to adjust this ASAP so I can make sure I don't owe the IRS too much at the end of the year. WIll this affect what the trustee considers my "take-home" pay? It has been overstated this year.

[UpsideDownMI]

If you are increasing the amount of taxes withheld it should not be an issue as the trustee will want all of your tax refund anyway.

[jwmc1]

Not looking to get a refund, just don't want to owe at the end of the year anymore

[UpsideDownMI]

Not looking to get a refund, just don't want to owe at the end of the year anymore

That's good. You should be fine.

[Ifonly]

We had that issue as well since I knew we would be "under-withholding" as soon as we lost the mortgage interest/property tax deductions when we surrendered our house.

Our attorney included increased tax withholding as a line item expense in our plan. The trustee did question it but all I had to do was submit a copy of the tax withholding calculator numbers from the IRS website showing that we would owe over $15,000 in federal income tax. $15,000 divided by 12 months and that was our allowed deduction.

I knew we couldn't be caught in a situation where we had to pay as the trustee would be taking our disposable income.

The explanation worked out fine and we were confirmed last month.

[DSIG]

this one is a true catch 22. Who has more power the Trustee or IRS? I included the IRS in my bankruptcy and they filed their proof of claim because of course they will get what they are entitled to...

But the IRS also sent a letter to my employer directing them to change my withholding status to single with zero exemptions. I am married and have a child. I guess that is their way of mitigating the risk of me oweing next year. For the 2008 tax year, I filed married filing separately for purposes of the bankruptcy. For this tax year I may file joint again. What gives the IRS the right to dictate my withholding status when they have absolutely NO clue how I will file?

Whether you owe or not and you keep changing your withholdings before you file for bk, the IRS will send your employer a nice letter also. Just be aware that this is how they operate.

[keepinitreal]

I did not know the IRS could direct an employer to change an employee's withholding status to single with zero exemptions. That is truly scary!

[jwmc1]

Has this happened to anyone else??????

[Heli]

[jwmc1]

Wonderful...something else to worry about...

[BNKRPTinNC]

...... the trustee will want all of your tax refund anyway.

I question this as some do and some don't. What determines whether or not they will ask for it, District you file in, Trustee, day of the week? The reason I ask is, so far, I have been able to keep mine and there was nothing in my paperwork saying that any refund had to be turned over. I only have to provide tax returns if requested.

[DSIG]

I did not know the IRS could direct an employer to change an employee's withholding status to single with zero exemptions. That is truly scary!

Oh yes, they can and they did. The IRS is the mafia incarnate. The tax code is intentionally long and confusing to allow the IRS to hide behind it.

My original return was challenged. The IRS dis-allowed my dependent because his SSN or something was incorrect. So, instead of asking me for the correct info, they assumed I filed an incorrect return, so they adjusted my return to single with zero exemptions. Their proof of claim with the bk court was filed based on their adjusted return, not the return that I filed. As soon as I called them and clarified the SSN, they adjusted the return AGAIN back to the original numbers I had, and filed an amended proof of claim with the bk court for the original amount. Their adjustment forced me to modify my plan twice and file with the court twice. Seems like a lot of unnecessary steps to take because IRS was too lazy to just ask for the correct SSN.

The letter to my employer probably went out as soon as they received my return.

According to the letter, the IRS has a Withholding Compliance unit who you can contact to dispute and challenge their direction the letter. You would have to provide documents to prove your filing status.

Here is an exerpt from the letter:

"If there is no reasonable basis to justify the withholding rate (marital status), withholding allowances, or exempt status claimed on your Form W-4 you may be subject to a $500 civil penalty under IRC 6688 for making a false statement about your witholding"

...and the IRS directing my employer to change my withholding status to single with zero exemptions is not a false statement?

This all seems like a cheap trick to make some interest off of my earnings by making me pay more upfront. They are crooks!

I'm not going to challenge this...I'll just look forward to a tax refund instead.

[DSIG]

I question this as some do and some don't. What determines whether or not they will ask for it, District you file in, Trustee, day of the week? The reason I ask is, so far, I have been able to keep mine and there was nothing in my paperwork saying that any refund had to be turned over. I only have to provide tax returns if requested.

I think it depends on each district. I am only 3 months into my 60-month plan. I asked my attorney if the refunds get turned over so I at least know how to file each tax year. He did not confirm or deny...he said, keep me posted but I think the trustee is happy with your plan

[UpsideDownMI]

I question this as some do and some don't. What determines whether or not they will ask for it, District you file in, Trustee, day of the week? The reason I ask is, so far, I have been able to keep mine and there was nothing in my paperwork saying that any refund had to be turned over. I only have to provide tax returns if requested.

The op is in the same district that I am in. Our district requires that all tax refunds go the trustee. I think I have found a "work around" for this, but I will not be sure that it worked until I am confirmed.