IRS Motion to Modify Stay not received

[irishonyx33]

Hello. My husband is currently in year 2 of a 13 in which the IRS is owed $7357.08 in a priority claim and our attorney had $16,509 bifurcated into an unsecured claim. We are allowed to keep all tax returns. Last year we were owed a federal refund of roughly $1900.00. The IRS filed a Motion to Modify Stay to allow for the offset of this return,which was approved. For 2012 we adjusted our exemptions to minimize tax returns. Apparently not enough because we are owed a federal return of roughly $1800.00. Due to the length of time that has passed since we filed without receiving our refund, it is apparent that the IRS will once again be seeking to offset these returns.

My question...they have not filed a motion so far to date...do they have an infinite amount of time to do so?

The Motion from last year clearly states it is only for 2011 returns, so I am pretty sure they would need to file another motion. My husband wants to call the IRS and ask that the refund be released since a motion wasn't filed. I think that will just prompt them to file a motion. The return would be nice to pad our savings..though we're not hurting for it. But if they're going to keep it, they should have to do so legally. I am hesitant to contact our attorney because I realize any work he does above typical monitoring will cost us more money. Any words of wisdom on how you would proceed if it were you?

Thanks in advance.

[despritfreya]

It is highly unlikely that the IRS would attempt to offset refunds owed for post petition tax years. There is probably some sort of freeze on the account that needs to be manually released. Call the taxing agency to find out what the hold up is.

Des.

[irishonyx33]

I checked Pacer today and once again, the IRS has filed a Motion to Modify Stay allowing for the offset of our tax returns again this year. I have heard this almost never happens, so I am not sure why they are doing it other than they are able. We have 15 days to file the objection, I assume from whenever they sent us the notice (we haven't received it yet). The money is owed, certainly...so is it worth it to file? And what would I even use as a basis for a objection? Maybe no real answers and I am more venting than anything. I've upped our exemptions again and I'll just make adjustments throughout the year after periodically checking the withholding calculator. Bummer...I was really hoping to dump that 2k into savings.

[despritfreya]

I checked Pacer today and once again, the IRS has filed a Motion to Modify Stay allowing for the offset of our tax returns again this year. I have heard this almost never happens, so I am not sure why they are doing it other than they are able. We have 15 days to file the objection, I assume from whenever they sent us the notice (we haven't received it yet). The money is owed, certainly...so is it worth it to file?

So bizarre and I wonder if they are doing this since you appear not to be represented by an attny. What law is the agency citing as authority to steal post petition assets from a debtor to pay pre petition debt? Further, is the money being used to pay down a priority tax debt and, if so, has the IRS amended its claim to reduce it? If it has amended its claim then maybe you can amend the Plan to reduce overall funding by the same amount. If you don't, the funds that were going to go to the IRS will now go to the general unsecured creditors. And, if the IRS is using the post petition refund to pay non-priority taxes, that would be just wrong. The non-priority claim is no different from a credit card so why should this creditor get special treatment?

Des.

[irishonyx33]

We actually are represented by an attorney, once who I thought was fairly decent since they were able to get so much of the IRS debt bifurcated to unsecured. I will copy & paste a portion of the letter here and maybe you can see what they are doing...

THE UNITED STATES OF AMERICA, on behalf of the Internal Revenue Service
(hereinafter "the Service"), respectfully moves this Court, pursuant to 11 U.S.C. §§ 105(a) and
362(d) and Rules 2004(a), 4001 and 4002(1) of the Federal Rules of Bankruptcy Procedure, for
an order modifying the automatic stay imposed by 11 U.S.C. § 362(a)(7), to allow the Service to
setoff the refund from against any tax liabilities of the debtor due the Service pursuant to 11
U.S.C. § 553(a).
IN SUPPORT THEREOF, the Service states:
1. The debtor filed a bankruptcy petition seeking relief under Chapter 13 on April 21,
2011.
2. The Service is a creditor in the bankruptcy proceeding.
__________________________________________________ __________________________
JAMES L. SANTELLE
United States Attorney
by: RICHARD CHARLES GROSENICK
Special Assistant United States Attorney
P.O. Address:
Office of Chief Counsel
211 West Wisconsin Avenue, Suite 807
Milwaukee, WI 53203
Telephone (414) 231-2816
FAX (414) 231-2803
EMail: [email protected]
Case -
3. The debtor has liabilities for federal taxes for the year 2005, 2006, and 2008.
4. The Service filed Claim No. 3-1 on June 8, 2011, in the amount of $23,866.08.
5. The debtor filed a federal tax return for the year 2012, claiming an overpayment in the
amount of $1,984.00.
6. The Service is prohibited from setting off any tax refunds by reason of
section 362(a)(7), which stays the setoff of tax liabilities of the debtor which would otherwise be
permissible pursuant to section 553(a).
WHEREFORE, in order to satisfy the debtor's outstanding tax liabilities to the Service in
a manner which causes the least inconvenience to the parties, the Service respectfully moves for
an order to modify the automatic stay so that the Service may setoff the refund of the debtor for
the year 2012 against the liabilities of the debtor.
Dated at Milwaukee, Wisconsin this 13th day of March, 2013.
JAMES L. SANTELLE
United States Attorney
By: __________________________________
RICHARD CHARLES GROSENICK
Special Assistant
United States Attorney

[irishonyx33]

Wanted to add...we mentioned this to our attorney last year and she acted a little "funny" about us not wanting the IRS to keep the refund. Said something to the effect of "there's no way you were keeping this refund anyways, not worth the fight". That is the reason I came here to get any opinions you guys would have...

[despritfreya]

11 USC § 553 - Setoff
a) Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case. . .

The IRS is citing this provision for the proposition that it can take a 2012 tax refund. How? The above provision requires the offset be by and for a pre petition debt. (Hence the reason your attny said you were out of luck for the 2011 refund) The IRS goes on to acknowledge that the automatic stay is valid for any attempt at a setoff that is outside the scope of 553 but that they should be allowed to take the money anyway. This is garbage and I would be all over it.

The IRS is attempting to go beyond the spirit of the setoff provision and is attempting to put itself ahead of all other creditors. It wants to apply the amount to, what appears to be partially a general unsecured claim. The problem is that fighting this, unless your attny will do it just on the principal of the thing and not charge you, will cost more than the refund. That is why the IRS is going to get away with this. Just garbage and my blood pressure is rising.

Also. . . If it is not too late please edit your post to remove all personal information including the case number. MODERATORS, if OP can’t do this, can one of you????? Thanks.

Des.

[irishonyx33]

Hey Des...thanks so much for looking at this.
I removed the case #...didn't see anything else identifying in the post.
Any chance I can file an objection without the help of my attorney?