Can I keep my current Tax Refund

[moe]

Is there a tax refund look back?

Like if we get a tax refund this year, do we have to re-pay it before we can file for Chapter 13?

[LadyInTheRed]

moe, I moved your post to it's own thread where it will likely be seen by more people.

There are two aspects to your question. The first is whether your refund is an asset. If you are owed a refund at the time you file, it is an asset subject to exemptions. If you can't exempt it, then your plan must pay to unsecured creditors who file claims at least the non-exempt amount of the refund and any other non-exempt assets. This is known as the "Chapter 7 liquidation test." In a Chap 13, unsecured creditors must receive at least what they would if non-exempt assets were liquidated in a Chap 7. Keep in mind that if you were to file in the middle of the year, half of your expected refund for the year should be listed as an asset.

The second aspect is whether the refund is considered income. If you get a refund each year, then when calculating your disposible income, your tax liability should be less than your actual withholding. It is your actual tax liability that should be listed as a deduction, not your withholding. Alternately, some Chap 13 petitions will list the actual withholding as a deduction from income, but the plan will provide that any refund must be turned over to the trustee.

[moe]

Hi

OK. Yeah, I guess it is an asset.

It's kind of hard to figure out exactly how to get my tax payments to be what I owe and no more. I do not want to owe more to the IRS and then screw that up somehow. We have a habit of paying taxes late since we never owe. I guess we will have to break that habit.

It's hard to figure out how to get it to be exactly what you owe and no more.

Do you know how long the look back is? We have gotten refunds each year. Are we going to have to pay our creditors all the money for those refunds? We would never be able to do that at this point. (Of course we ARE paying our credit cards each month!)

But if we got a refund of $5000 for each year of the last 3 years are we going to have to go back and then come up with $15,000??? We could never do that.

So I guess I need to know how far back they go.

We have not declared bankruptcy yet. I am just trying out how to understand the law right now and how not to run afoul of it.

[LadyInTheRed]

The law is that you must pay all of your disposible monthly income (DMI) to the plan, unless you are paying 100% of your debt. What is relevant is how much your tax liability is projected to be. There really is no official look back for taxes. You have to submit your most recent tax return to the trustee before the 341, but the trustee can ask for more. If you deduct your actual withholding from your income when determining your DMI, but then you get a refund, then that entire refund, divided by 12 months, is disposible income. If your 2012 income and tax liability is expected to be the same, then it's pretty easy to figure out how much your tax liabilty is. But, you expect your income to decrease and federal taxes are higher in 2013 than in 2012. Different attorneys and different trustees will handle the situation differently. This is another detail that you need to discuss with your attorney.

I always get refunds. I prefer to have a refund than to risk owing. I actually have no idea how this was handled in my plan, except that I have a plan payment I can afford and get to keep my refunds.

[dmc-2008]

I have to turn over tax refund to trustee. Last year I owed 900.00 to fed and got back 1300 from state. I still had to give the trustee the 1300, and I had to pay the 900.00 to gov! It's a bummer. I looked up my write offs last year and my taxes owed and just trying to come close this year.

I hope the trustee doesn't adjust my payment if she notices no refund!! :-(

[keepsmiling]

Moe, you will have another exemption next year with the new baby so you may get more back. You will have some other changes as well so it could go either way.
You haven't filed yet and you are getting a refund? Why not file tomorrow and use the money to retain an attorney and stock up on things you will need for the new bundle of joy. Is this your first by the way? I hope you can find a way to relax and enjoy this exciting time!

[moe]

OK, this is very helpful. But I feel like an idiot. Why do I get so much money back? I tell them how many kids I have!!!

Maybe I am calculating my income wrong because I also have some pretax things like daycare taken out??? And the pretax medical expenses and whatnot. I can't figure out what to tell human resources about my withholding to get my refunds down.

I'm just going to try to get the refunds down so that it will all be simpler. I haven't figured out yet why we tend to get a sizable refund each time. Maybe human resources could help but they are not very helpful about things like this.

[dmc-2008]

Do you have property? You have interest write offs? Just up you deductions. It better to owe a couple hundred then get back refund just to hand over. You gotta find the sweet spot and its hard to do the first year! I hope i did it right but ask a tax preparer! Thats what i did.

[keepsmiling]

Yeah, it might be worth consulting with an accountant.
Meanwhile, get this year's money NOW!!!