Filing Taxes this year with Ch 7 discharge looming, questions...

[knowledge101]

I know people here can't provide legal tax advice, but just want a general idea if I get this right. My 341 meeting was closed by the trustee last month and I am deemed a no-asset case. I had a good amount of leftover exemptions as well (I believe it was a few thousand dollars in wildcard that I never used). I was not expecting a tax refund this year, but doing some preliminary calculation I may end up receiving $1000-$2000 when I file. My discharge for the Chapter 7 is February 6th.

Two questions:

1. Does a trustee still bother to file a 1041 for a no-asset case?

2. Can my tax refund be protected this late in the game if I had left-over wild-card exemptions and did not utilize them because I was not expecting a tax refund? Or is this not an issue anymore because the trustee closed the case and asked to be relieved of duty since it was a no-asset case?

Thanks for the advice!

[justbroke]

1. Does a trustee still bother to file a 1041 for a no-asset case?

If a trustee files a report of no distribution then there is no tax obligation so no IRS-1041 to file. There are some thresholds to filing a 1041 which are not always met in consumer Chapter 7 bankruptcy cases (and appears to be at least $10,300 according to the 2015 instructions for IRS-1041). In any case, that's a tax on the "bankruptcy estate" and not you personally, so you would not need to worry about it.

2. Can my tax refund be protected this late in the game if I had left-over wild-card exemptions and did not utilize them because I was not expecting a tax refund? Or is this not an issue anymore because the trustee closed the case and asked to be relieved of duty since it was a no-asset case?

If the Trustee submitted a report of no distribution and didn't ask for your tax refund, then there is nothing you need to do. If the Trustee mysteriously rescinds a report of no distribution I suppose you'd just amend the petition (fee about $31) and add the exemption for the unanticipated tax refund. If you had filed with through an attorney, the attorney may have already "costed" your average refund into the calculation of your current monthly income (CMI) on the means test. In that way, it's not an overwithholding that the trustee/estate didn't include.

I just wouldn't worry about this unless the Trustee comes looking for it.

[knowledge101]

Thank you!