Tax Refund in 100% plan - owe back taxes inside plan.

[murph996]

I filed for Chapter 13 100%plan and was confirmed in December. Included in this are federal taxes from prior years including 2011 tax year. I had filed an extension for 2012and will be due a refund.

I always assumed this ould go towards the tax debt from prior years, but reading some articles, I am a bit confused and believe that they may indeed send me the refund. Does anyone know for certain what the rules are here?

Thanks

[justbroke]

When I was in my Chapter 13 with IRS arrears, I still received my refund!

[spidge]

I would think that since you are in a 100 percent plan then it will be sent to you as the IRS already has you basically on a payment plan through your BK. Check with your attorney though to be certain. I am in a 3 percent plan and even though the check comes to me I have to sign it and send it on to the trustee.

[murph996]

I had just assumed that I wouldn't get it. In the past when I owed back taxes, I never received any refund. It would be nice. I'm getting ready to file..just waiting on ss# for my youngest. I'll just wait it out and see if I get the refund or they apply it. Worst case if they apply it to the balance, my plan will be paid off a few months earlier.

[justbroke]

Chapter 13 Bankruptcy is special! The only way the IRS could take your refund as an offset, while in an active Chapter 13, is to file a Motion for Relief from Stay for that specific refund. It is usually the IRS' position that a person in an active Chapter 13 with a confirmed plan, is on a payment plan. However, typical IRS payment plans, such as the Online Payment Agreement or others, will still offset your arrears with refunds! In Chapter 13, it has long been held that creditors can't attach property that is provided for within the plan without seeking relief. The IRS learned the hard way that they can't offset the refunds. Some Trustees have also learned, the hard way, that they can't "redirect" IRS refund checks to themselves (the Trustee).

This is why confirmed Chapter 13 debtors still receive their refunds so long as they did not go into arrears POST FILING.

[murph996]

that is wonderful news!! Thanks so much. I guess I'll get cracking on getting my taxes filed.

[justbroke]

If you file electronically and/or check "Where's My Refund?", you may get a response which indicates that there was a problem with your refund and that it is delayed. Even though I received that response, I still received my refund on the date that I expected it. What happens is that the IRS has to manually review your refund. They typically aren't interested in going through the "red tape" (paperwork, motion for relief) to keep the refund, so they just let it go through. I have not read any case in which the IRS decided to do the whole motion for relief. I am saying that it is within the realm of possibility that the IRS could decide there's enough refund to do the paperwork.

To give you some idea... I owed the IRS $7,000 upon confirmation. My next tax refund was just over $7K. The IRS still refunded the money since I was in an active plan.

[tammygirl1]

The IRS has not kept any of my 3 refunds received so far BUT money was redirected to Child Support Arrearages even though there was a claim and amount being paid off through our monthly payments.

[spidge]

The IRS kept my 2012 refund to offset my 2010 taxes owed that were not in the plan. December 2010 was my 1st CH13 payment. The IRS rep gave me a specific address to mail my payments to and just told me to send what I could, which has not been anything. I expected this, but hopefully the trustee does not object. It was not much money, but you never know. My state refund came today so will send it, the letter from the IRS explaining the offset, and my taxes off to the trustee.

[justbroke]

spidge, that is a perfect example where the IRS could do an offset without any need to obtain relief. I wonder why you did not include the pre-petition arrears in the plan?

[spidge]

spidge, that is a perfect example where the IRS could do an offset without any need to obtain relief. I wonder why you did not include the pre-petition arrears in the plan?

I did not include them as I did not know I owed them until after I had filed BK. I always thought I could pay it on my own too.

[murph996]

justbroke, how long did it take to receive your refund?

I am finishing up my return and it looks like I will be due a $3000 refund. I still wouldn't be surprised if they keep it. I owed on my 2011 taxes which were filed literally days before my meeting of the creditors and a month before my confirmation. However, they amended their claim to include the 2011 taxes so I should be ok. I actually have to amend my 2011 return. I didn't have my son's SS# and they revised it to take away his exemption..That return will be amended roughly the same time.

[justbroke]

I file electronically and filed by the Tuesday evening cutoff. I received my refund, electronically, the following Friday.

[murph996]

I filed electronically on Friday. My return was accepted by IRS almost immediately. Waiting for the magical 'Refund Approved' status. I did confirm that the 2011 taxes that I filed just before filing in 2012 are included in the plan - they are. TurboTax is estimating I will have refund between the 27th and 29th. I kind of expect it to be a few days later allowing for the manual review that may be necessary. Could really use this cash..needed an auto repair today.

[justbroke]

You will just need to see what happens. Just check "Where's My Refund" over the next few days. The IRS has been doing refunds pretty quickly (7-10 calendar days -- not "business" days).