Tax Refund: Stop me before I do something stupid

[lorelei]

Another "that time of the year" question...

I'm anticipating a couple thousand back in a tax refund this year and I plan to file Ch. 13 (or Ch. 7 if I get a job offer that pays a bit less) in the coming months.

I plan on using the tax refund to do things such as:

• Get work clothes (seriously overdue, my last pair of work shoes was bought 6 years ago and they leak now)
• Get computer components to resolve it's little crash-and-burn problem
• Become current on utility bills
• Become current on mortgage payment (I'm less than 30 days overdue)
• Do some needed home repairs

Will I likely be asked to justify these expenses? If I don't spend the money, I assume I'll lose it come filing day?

What if I use $333 to pay off a hospital bill in order to fend off a possible lawsuit, thereby buying myself a little more time before I file for bankruptcy? (Though I really don't know if that's smart at all, and I tend to think it's not worth it)

[enginegirl]

As long as the money is spent on items that you can justify it shouldn't be a problem (stock up on things you think you willneed int he coming months.. there is pleanty on the forum regarding this!). I personally would not use it to pay off any bill at this time as it may been seen as preferential treatment!

Be aware that your trustee might divide the amount by 12 and add it to your monthly payment as it will be the amount you are overpaying in taxes in his/her mind (my trustee did this to me and it was a battle to get her to realize that I wouldn't be seeing $8000.00 tax refund this year but and mere $1000.00).

Good luck to you!

[lorelei]

Be aware that your trustee might divide the amount by 12 and add it to your monthly payment as it will be the amount you are overpaying in taxes in his/her mind (my trustee did this to me and it was a battle to get her to realize that I wouldn't be seeing $8000.00 tax refund this year but and mere $1000.00).

Exactly my thinking! If they're going to tack it onto my income, I might as well get the benefit from it while I can. Bulk packages of rice and beans, here I come!

[enginegirl]

Bulk packages of rice and beans, here I come!

ha and they are not all to bad!!!

[lorelei]

Oh, a follow-up? This year's tax refund is likely to be much larger than next year's, as this year I took a $4,000 credit for tuition and I no longer am a student. Also, I deducted student loan interest, which I understand I won't be able to do under Ch. 13 as I'll have those loans deferred. How do you go about making sure the projected income tax refund isn't the same as the larger one I'll see this year?

[enginegirl]

I had to turn in a projected tax return for 2010 vs 2009 to show the decrease... but also know, my attorney SUCKED and it should have never gotten to that stage. .... be sure that when your attorney makes your plan she/he takes the loss of deductions for taxes into account etc..... There are various reasons for refunds being higher/lower... mine was due to losing 2/3rd of my income and not paying the interest on my 2nd (and soon to be stripped) Mortgage.
In order to balance out the higher payment my trustee allowed me to revise my withholdings... something you should only do after consulting with your attorney!

[lorelei]

Gah! I hadn't even thought about what the interest on the to-be-stripped 2nd mortgage would do...

[enginegirl]

Right now don't let that worry you. Be sure to get a competent attorney, that really is the most important thing. Do not allow yourself be put in a plan that you do not believe you can pay, make sure you are set up to succeed! research everything and make sure that your attorney uses every single deductible they can find...

[newbie2]

Since you are in Michigan talk to your attorney about revising your withholdings before you file. Once you file it cannot be done. Also, save all your receipts for the items you purchase using the refund. The trustees in Michigan love documentation :-)