IRS Standards for expense and Ch.13

[smkrishna]

I found that there are IRS Standards for Household, Mortgage, Transportation and Misc. Expenses for every type of family. If we are ready to go with that IRS standard amounts, do we still have to show the receipt for all the expenses that we incur? or do we have to show the receipts only when our expense is more than the standard allowed amount?

The answer would be helpful in preparing myself for start collecting the receipts to prove expenses for Ch.13.

[justbroke]

If you are over-the-median income, the expense is already set for you. The amount, for most of these, is both the floor and the ceiling (minimum and maximum) you can claim in that category. There are some categories that you can exceed though, but they require receipts. For example, Food and Clothing is pretty much set. However, you can exceed "home energy costs" so long as it's reasonable and you provide receipts.

(Note: there is a category for "special circumstances" but usually those are reserved for medical reasons.)

[smkrishna]

Justbroke.. Thanks for your replies...I am sorry for asking silly questions..But, when you mean by min. and max. has been set, I went through the IRS standards for a family of four in broward county:
a) Housing and Utilities expense - $2,111 (broward county for a family of four)
b) Local Standards - transportation -$300 (miami- one car)
c)Food, Clothing and Other Items - $1,371 (for a family of four)
So, total - $3,782.

Do you mean to say, if I dont cross the above amounts, I dont have to show receipts, right??

For me, the only thing that may exceed is Housing, Utilities expense as
1,250 (mortgage) + 350 (tax) + 100 (Insurance) + 100 (HOA) + 100 (maintenance) + 200 (electricity) + 100 (water/sewage bill) = $2,200 (I can try to include other items to make it $2300 or $2400). Do you see any problem here?

[justbroke]

Do you mean to say, if I dont cross the above amounts, I dont have to show receipts, right??

If you are over-the-median income. If you are under, then you may be asked to prove the expense.

For me, the only thing that may exceed is Housing, Utilities expense as 1,250 (mortgage) + 350 (tax) + 100 (Insurance) + 100 (HOA) + 100 (maintenance) + 200 (electricity) + 100 (water/sewage bill) = $2,200 (I can try to include other items to make it $2300 or $2400). Do you see any problem here?

Don't worry about a house that you're keeping exceeding the housing allowance! You don't get the housing allowance, but you get to claim, on the Means Test and Schedule J, all the costs of owning the home including principal, interest, taxes and insurance (PITI) as well as home owner dues and assessments!

Water and electricity will come from the "non-mortgage/non-rent expense" category. I hope you're using the Office of the United States Trustee's website and not the IRS' website.

I looked it up for you. The non-mortgage/non-rent expense is $598 which means your electricity, water, basic telephone service, sewer and trash should be less than that. Even if your totals exceed that, you can claim "home energy expenses" in excess!

http://www.justice.gov/ust/eo/bapcpa/20100315/meanstesting.htm

[smkrishna]

Thanks again Justbroke.. I feel so relieved after reading your reply. I am very positive in going for Ch.13. I am planning to meet my attorney again on Monday. I will confirm all my questions with her. Thanks again for your time and effort in keeping this forum alive by answering questions....

[smkrishna]

Justbroke, I talked to my attorney and she brought a good point that concerns me. I was under the impression that Florida prepaid tuition plan payment that I am making for my son can also be included as part of my expense. But, she told me that it will not be an expense but a saving according to trustee. So, this amount is exempted from creditors but cannot be part of expense for Ch.13.
If that's the case, will 401 (k) also be considered as part of saving?

I am starting to calculate my expense from my net salary (after all deductions including tax, medical insurance, 401(k), charitable contribution)... Do I need to start my expense from my Gross salary or net salary that I get in my bank a/c?

Your feedback will be appreciated.

[justbroke]

If that's the case, will 401 (k) also be considered as part of saving?

A 401(k) contribution is 100% protected by the Bankruptcy code, so long as it's reasonable and within IRS guidelines for deductability (tax free).

I am starting to calculate my expense from my net salary (after all deductions including tax, medical insurance, 401(k), charitable contribution)... Do I need to start my expense from my Gross salary or net salary that I get in my bank a/c?

You calculate expenses based on gross salary. Taxes are an "expense" as well as other deductions like medical insurance, and 401(k) programs.

[smkrishna]

Can I increase my 401(k) contribution or tax deduction 3 moths before filing to reduce my DMI? What I am saying is increasing little on both sides so that increase is not visible too much? Justborke, do you know how does trustee in Broward county treat that?

[justbroke]

Increasing your tax deductions is a non-starter! Trustees look for that tactic. Besides, your District may require surrendering all future tax refunds. That would just delay sending the money to the Trustee.

As I wrote in another thread, increasing your 401(k) contribution rate up to the point where your employer stops matching, could be done easily. Exceeding that could cause questions.

[smkrishna]

Increasing your tax deductions is a non-starter! Trustees look for that tactic. Besides, your District may require surrendering all future tax refunds. That would just delay sending the money to the Trustee.

As I wrote in another thread, increasing your 401(k) contribution rate up to the point where your employer stops matching, could be done easily. Exceeding that could cause questions.

Justbroke, how do I know whether my district requires me to surrender all future tax refunds??!? This is a very important thing for me for next 5 years...My attorney never said anything about this.

If I go to attorney in miami, will I come under Dade district or as I live in broward county, I will come under broward district?? Is there any website where I can find more details about what to expect in my district??

thanks again justbroke.

[justbroke]

Justbroke, how do I know whether my district requires me to surrender all future tax refunds??!? This is a very important thing for me for next 5 years...My attorney never said anything about this.

If you're in Florida, then you'll be surrendering all future tax refunds in a Chpater 13. For the most part, ALL Districts have this requirement, not just Florida. Many attorneys will "factor" in your average income tax return as income and some Trustees won't require the refund, but you still will probably get a generic set of provisions in your Order of Confirmation demanding the surrender of all future tax refunds.

If I go to attorney in miami, will I come under Dade district or as I live in broward county, I will come under broward district?? Is there any website where I can find more details about what to expect in my district??

Those are considered Divisions of the Southern District of Florida. You would want to file in the Division in which you live, so you don't have to drive far to court.