Is an income tax return considered income ?

[gak555]

Sorry, I asked this question once before, but did not get a clear answer. It seems like since the gross income you made over the last six months has already been calculated in the means test , that you should not count the income tax refund as income as it has already been counted ???

Also, what can you still count charitable contributions /

[no_it_all]

Tax refunds are not income. Income is derived from wages. To wit: You make 40K a year and get a 5K refund...did you make 40k that year or 45K??? Do not confuse gross income with net income...

[SamanthaJones]

no it all-

Do you have any reference that states a tax refund is not included as income as far as a bankrupcty/median income are concerned?

[keepmine]

The schedules don't ask about refunds in the questions concerning income.

[SamanthaJones]

The means test asks for

all other income from all other sources, though. If tax refunds are specifically excluded, does anyone have any reference? (The IRS may not consider something income, but bankruotcy is another story). Thanks

[bige1030]

Tax refunds are already included in your gross income amount. They're not any different from any other dollars you make except that your employer takes them out of your paycheck, only for them to be returned to you when you file your income tax returns.

The big issue with tax refunds in Chapter 7 is that they are likely not exempt property and have to be turned over to the trustee. It's kind of like having that money in a bank account - except that it's on deposit with the government and is due to you.

In Chapter 13, people see trustees wanting their tax refunds all the time. That is because that money is disposable income (since it wasn't used for a legitimate expense...just for overpaying taxes).

[HHM]

I don't have a specific reference, but so far, everyone who has filed has NOT listed a tax refund as income, and the trustee hasn't blinked. IMO, an income tax refund is not part of the income/means test calculation. Mainly because a tax refund is technically "earned" over the course of the prior year, so most of any refund will fall outside the 6 months time frame. In addition, you cannot use the "wage" exemption to exempt tax refunds, hence, another reason tax refunds are probably not income. Moreover, tax refunds seem to be treated more like assets than earnings. The trustee doesn't go after your refund because it is income, he goes after it because it is a cash asset, and some states will allow you to exempt it in some manner, and some don't.

Thus, I don't think you count tax refunds as income for purposes of the income/means test.

[SamanthaJones]

I hope it isn't.

Because if it is it prevents me from getting a new job- there's no way I'm going to risk going over the median. If anybody has any reference to income tax as income for the means test, hit me? ~

[HHM]

Also too, chatper 7 trustee's don't want the refund to be treated as income for the means test for that very reason. Chapter 7 trustee's earn money off the money they collect for creditors, so it is not in their interest to have cases convereted to a chapter 13 (this is why the US Trustee oversees the BK process). Tax refunds are the primary way chapter 7 trustee's get money for creditors.

I think you are quite safe in the fact that refunds are NOT counted as income for purposes of the means test.

[SamanthaJones]

Still, if anyone has any personal insight?

Yes, my tax return will have been long spent if I end up filing BK- just to pay my routine bills. And as far making money off of BKs? I KNOW lots of lawyers are steering folks to 13 so they can make more money. That is ROTTEN.

[yomama]

Yes, my tax return will have been long spent if I end up filing BK- just to pay my routine bills. And as far making money off of BKs? I KNOW lots of lawyers are steering folks to 13 so they can make more money. That is ROTTEN.

The first lawyer we saw (free consultation) tried to do this exact thing to us! We knew we didn't have the money to pay creditors, yet he was putting us in the chapter 13 category an told us, "it's much easier to convert from chapter 13 to a chapter 7 if need be than go from chapter 7 to chapter 13." When my husband and I saw him I don't think I was on this forum yet or else I didn't yet fully understand things the way they actually are...anyway, at the time we saw that lawyer, we went in thinking that we would have to give up everything in chapter 7 and expressed that concern to the lawyer and he didn't say anything to the contrary. He fed off of our insecurities and naivety, leading us to believe that chapter 13 was the way to go so we could keep everything. Very deceptive lawyer and I'd never go to him for anything! His fee of almost $4000 was what I thought was extremely high and later learned on here that it was. My husband and I went to a different lawyer for a consultation and felt very good about him and his fee of around $1000 was much more reasonable so we are having him do the bk for us. I'm so glad I found this forum and have learned so much. Like people on here suggest, I'd recommend to anyone to go to 2 or 3 different lawyer consultations and not settle for the first one. It's just like you said, some lawyers are steering people towards chapter 13 to make more money, and I also think that is ROTTEN. Talk about bottom dwellers!

[BKOnce]

IRS considers their refund for this year not as income but would contribute into the income next year when you filing the itemized deductions paper. See form 1040 instructions.

[SamanthaJones]

Say that again, in simple language?

Thanks.

[BassBoy]

If you think about it SJ, when one files they list their gross income, and not net income. So, if we are listing our gross income, how can we add a tax refund to that as additional income. In BK, the refund may be an asset, and not income.

[jal1129]

We will be filing this month as soon as we get the money together and had a consultation this past week. We were told that our refund would have to fit within our exemptions (and in our state its not much!), but it should'nt be a problem. She also said the trustee will usually take the refund in cases where the debt is over 100,000. We are'nt there yet but with the way penalties and interest are adding up we probably will be in a couple of more months!