Tax Question during 13

[tammygirl1]

Both the IRS and State filed a POC and we plan to pay off during our time but what if we end up with refunds going forward? I know they will keep the refund, but will they adjust their POC to the new amount or leave it? Will the trustee continue to pay what the POC is for or will he/she adjust the payments towards taxes? I know I will pay the same amount either way but if the trustee continues to pay the same amount to IRS/State after refunds are kepy there could possibly be an overpayment of taxes in the end.....humm.
Any insight appreciated

[FishersMike]

From reading numerous post on here, the IRS will not hold the refund. They will send to you or the Trustee (even though I believe there was a ruling where the Trustee could not automatically intercept at least in some districts). So if you are paying in plan I believe you get the money -- now the Trustee will tell you if they want all or part of it however. Luckily I get to keep half of mine and I will have like $15000 in taxes paid to them.

[HHM]

Generally, your chapter 13 plan should have language that addresses the issue. You can write just about anything you want into a plan. Normally, in these cases, the tax refunds are not withheld by the taxing authorities (because of automatic stay issues). The question becomes whether you get the refund or the BK trustee.

[tammygirl1]

Then I am confused...because we ended up filing my husband's 2006 after filing (and after POCs submitted) and both the IRS and CA State applied it towards back taxes but have not adjusted the POC. We won't be getting those refunds. Trustee hasnt started distributing yet...

[tammygirl1]

HMM, they applied our 2006 tax refunds towards the backtaxes....but haven't adjusted the POC...

[FishersMike]

You are lucky -- I had a "small" refund due from 2006 but got a nice letter saying since it was over 3 years old they were not paying me.

[tammygirl1]

This was for about 2k between the 2 agencies so it would have been nice to get that as a refund.

[HHM]

That is because the tax refund you got was for 2-0-0-6. That refund was due BEFORE filing and therefore a pre-filing asset for which the IRS was already entitled to take...keep in mind, you EARN the tax refund in the year for which it applies; it is irrelevant when you actually file the return. Your question was whether they could apply "future" refunds. The answer is no.

If the refund was applied to taxes that were included in the plan, than YOU need to object to the POC's, or file POC's on your own on behalf of the taxing authorities.

[tammygirl1]

Thanks HHM. I will contact my lawyer as they did apply to taxes included in plan for both State and IRS.