Tax refunds and tax debt?

[spidge]

The situation;
Filed CH13 with federal and state taxes in the plan from a few years ago. Have federal taxes still owed from 2010 not in the plan. We will have a refund from state and federal on our 2011 filing.

Is there a way to bypass the trustee and make both the state and federal refund go directly against the 2010 federal taxes owed? I believe the IRS will withhold their refund and apply it, but can I direct the state (CA) to apply their refund to the 2011 federal debt?

[spidge]

I guess my main question is can the state refund be credited toward the federal tax that is not in the plan, and will the federal refund be applied to last years tax which is not already in the plan?

[justbroke]

If you're saying that your Federal 2010 Tax year was not included in the plan and you owed taxes and didn't pay them, and your Federal 2011 Tax Year has an overwitholding with a refund due... then they can setoff the 2010 tax with the 2011 overpayment since neither is so-called "pre-petition" tax.

The State refund almost certainly will not be used to setoff "federal" taxes from the IRS.

Please make sure you don't get into post-petition tax jeopardy! This is certainly a way to get off-budget and start to create serious problems for your Chapter 13!

[kakdbass]

The IRS will most likely offset your refund to pay 2010 taxes. I would call and see if they have plans to offset. The state will not take your refund for Fed. taxes. You could have your attorney draw up a motion to retain your refund and the trustee might go for it, however, the other creditors may not. What does it say on your confirmation regarding tax refunds? Are they to be surrendered?

[spidge]

It does say they will be surrendered, but I was hoping to have these offset the 2010 taxes that are not in the plan.

[AngelinaCat]

If you used an attorney to file your CH13. ask this question of him/her. You need to be very clear here on what you are doing.

I would think that any IRS tax refund you should be entitled to, would be sucked up by the debt you owe the IRS. We have experienced this. We were due refunds the last two years, and each time, the refund was applied to the taxes still owed. However, we aren't in the middle of a plan where part of the delinquent tax is included. We were CH7 people.

Again, you need to talk to your attorney, and/or your CPA if you have one.

Good luck!

[spidge]

So I have gone over my taxes to find anything that I might be able to add to it for accuracy. I show that I owe the IRS $116 for 2011 so no big deal, but the state come out with a refund of $433.
Asking myself these questions;
Can I apply my state refund to this years state tax bill?
Will the trustee have issues with that?

Hoping there may be some experiences to share on the subject.