post petition tax debt

[patieboy38]

hi all,
any advice on adding tax debt to a plan with only 9 months to go? IRS adjusted a few of my returns for previous years and hit me with a large bill...I'm reading mixed opinions online...thanks

[despritfreya]

Are these post petition years or pre petition years?

Edt. to add. . . I forgot. . . how much in total tax are we talking about?

Des.

[justbroke]

The real key is how much is the bill, and would your plan still be feasible if you included them in your plan (since you must pay priority tax debt in full). So, as Des writes, how much are we talking?

[patieboy38]

The real key is how much is the bill, and would your plan still be feasible if you included them in your plan (since you must pay priority tax debt in full). So, as Des writes, how much are we talking?

Hi guys, thanks for replying. It's post petition years. 2010,11 and 12 - filed in 2009. Wife claimed home office those years (she works from home) but turns out she can't claim it. Bill is 25k with all the fees and penalties (about 6-7k per year underpaid).

My plan is paying unsecured creditors since early 2012 I believe. Plan is about 2k month so it would need to be upped to pay the whole bill.

[despritfreya]

Theoretically, if the taxing agency is willing to file a “1305 claim” (11 USC 1305), the post petition taxes can be paid through the Plan. However, such does not appear to be feasible as you are already a 60 month Plan with only 9 months remaining. Your Plan payment would increase by no less than $3,000.00 per month. Makes no sense.

Once you complete your case and get your discharge go to the taxing agency and enter into an installment agreement. I’m thinking that a payment equal to your current Plan payment is a good starting place for what to pay on a monthly basis.

Des.

[catleg]

If I were you I would get on top of this right away.

The trustee is going to keep making payments to those unsecureds until your account runs out of money. (there is usually a buffer of 1-2 months)

So get your lawyer to let him know right away that there is a new IRS claim and you are going to be filing an amended plan. In the meantime I would hold off making any new payments (if possible, depends if you are on court-pay or self-pay) until you get this sorted out.

IF you have 9 months left at 2k a month that's potentially 18k to the IRS. I'm not sure if your post petition claim will segregate into secured and unsecured parts, hopefully it does because getting penalties and interest made unsecured will be a big help to you. If not at least they will get paid ahead of your other unsecureds.

You'd face about a 7k shortfall in addition to your payments. Plus there will be additional legal fees to be paid thru the plan. In NJ you can miss 2-3 trustee payments before they notify you to catch up or get dismissed. At least if your trustee is the guy near AAA in Robbinsville if you know what I'm referring to.

The key to this is getting the IRS to file a claim, your lawyer hopefully knows how to get somebody at the IRS to take this step for you.

[despritfreya]

Catleg,

I believe it is unlikely that the court will allow OP to reduce the dividend to general creditors at this time. They are getting what they are getting either due to the value of non-exempt property or based upon what the OP could afford at the time of confirmation. In addition, failure to stay current in payment of post petition taxes can be grounds for dismissal therefore, an attempt to reduce the payout to unsecured creditors by diverting $$ earmarked for them to pay taxes that should have been paid when due, IMHO, may be problematic. (Although I do agree that OP should discuss this with a local attny.)

Des

[patieboy38]

If I were you I would get on top of this right away.

The trustee is going to keep making payments to those unsecureds until your account runs out of money. (there is usually a buffer of 1-2 months)

So get your lawyer to let him know right away that there is a new IRS claim and you are going to be filing an amended plan. In the meantime I would hold off making any new payments (if possible, depends if you are on court-pay or self-pay) until you get this sorted out.

IF you have 9 months left at 2k a month that's potentially 18k to the IRS. I'm not sure if your post petition claim will segregate into secured and unsecured parts, hopefully it does because getting penalties and interest made unsecured will be a big help to you. If not at least they will get paid ahead of your other unsecureds.

You'd face about a 7k shortfall in addition to your payments. Plus there will be additional legal fees to be paid thru the plan. In NJ you can miss 2-3 trustee payments before they notify you to catch up or get dismissed. At least if your trustee is the guy near AAA in Robbinsville if you know what I'm referring to.

The key to this is getting the IRS to file a claim, your lawyer hopefully knows how to get somebody at the IRS to take this step for you.

Thanks catleg, kind of what I was thinking - not skipping payments but paying towards the end of the month and rushing to get a claim in. However, I'm reading nightmare scenarios about it backfiring and, I have a pretty significant lien strip that if the case got dismissed , I wouldn't be able to do again. The IRS offers 72 month payment plans which I think I'll do.

[patieboy38]

Agreed, I don't think it's worth the risk of trying. If I was half way through perhaps. My only concern is the IRS doesn't force a claim as it states to call them if I'm in an active BK. As you mentioned above to pay it in full over the remainder would be a very high nut if it got approved. It would doable but still, too much risk of poking the bear.

[sophieanne]

Once you complete your case and get your discharge go to the taxing agency and enter into an installment agreement. I’m thinking that a payment equal to your current Plan payment is a good starting place for what to pay on a monthly basis.

Hi Des,

Just a quick (hopefully not stupid) question. I thought when it was time to discharge a chapter 13, one of the things the trustee does is to check if the debtor has outstanding child support orders or tax due. I thought if there were either of these owing the case would not be discharged until those were cleared up. Did I minunderstand???

Thanks!

[despritfreya]

Just a quick (hopefully not stupid) question. I thought when it was time to discharge a chapter 13, one of the things the trustee does is to check if the debtor has outstanding child support orders or tax due. I thought if there were either of these owing the case would not be discharged until those were cleared up. Did I minunderstand??

Absolutely not a stupid question. I too thought post petition taxes had to be current for the entry of a discharge. However, a while back I had to comb through the Code to actually find such a provision. As far as I can tell, there is none. 11 USC 1328(a) requires the debtor, before obtaining a discharge, to "certify" that, unless otherwise waived by the court, all post petition DSO payments have been made. There is no reference to post petition taxes.

I do know that the taxing agencies can and do file Motions to Dismiss due to failure to pay post petition taxes. This falls under 11 USC 1307(c). The phrase “for cause” means just about any reason, not only the 11 ones listed. Courts have held that since “for cause” is followed by “including” it really means “included but not limited to” the 11 reasons listed. Interestingly, one of the enumerated causes is “failure to pay any DSO that first becomes payable after the date of the filing of the petition”.

Now, if someone can find a provision that requires post petition taxes to be current before entry of the discharge. . . please let me know.

Des.

[patieboy38]

Absolutely not a stupid question. I too thought post petition taxes had to be current for the entry of a discharge. However, a while back I had to comb through the Code to actually find such a provision. As far as I can tell, there is none. 11 USC 1328(a) requires the debtor, before obtaining a discharge, to "certify" that, unless otherwise waived by the court, all post petition DSO payments have been made. There is no reference to post petition taxes.

I do know that the taxing agencies can and do file Motions to Dismiss due to failure to pay post petition taxes. This falls under 11 USC 1307(c). The phrase “for cause” means just about any reason, not only the 11 ones listed. Courts have held that since “for cause” is followed by “including” it really means “included but not limited to” the 11 reasons listed. Interestingly, one of the enumerated causes is “failure to pay any DSO that first becomes payable after the date of the filing of the petition”.

Now, if someone can find a provision that requires post petition taxes to be current before entry of the discharge. . . please let me know.

Des.

Interesting as I thought the discharge audit for more for making sure the creditors were paid correctly, etc. Does the trustee actually seek financial status of the debtor before allowing discharge? Will they want to know if I have any post petition debt? (taxes?)
Thanks

[despritfreya]

Does the trustee actually seek financial status of the debtor before allowing discharge? Will they want to know if I have any post petition debt? (taxes?)

Not that I am aware of. Trustee simply verifies that all the terms and conditions of the Order Confirming have been met. Once that is done he/she files his/her report of a completed and paid out case. In my district the debtor must then "certify" that he/she is entitled to a discharge. One of the things the certification states is that all domestic support payments have been made. There is no mention of payment of post petition taxes or any other type of post petition debt (other than support).

Des.

[patieboy38]

Thanks Des.

[catleg]

Good points Des you are always the definitive source here.
Just wondering if the OP might get into an IRS payment plan and then have his ch13 trustee plan payment adjusted to subtract the tax payment..kind of like a "step down" plan.
My reasoning being, the creditors paid in the plan benefited by his underpayment of taxes (increasing the dividend), therefore, they would not be unduly burdened by the repayments to the IRS for taxes unpaid.
But whatever, glad you are so close to the end of a ch13 and are actually getting a benefit from it (lien strip).
I was in a BAPCPA forced ch13 due to high income but converted to ch7 based on my income becoming exempt due to disability. (using state exemptions instead of Federal)