$17,000 Income Tax REFUND

[yoyoma51]

What a pickle.

We had anticipated a tax refund of about $5,000 due to losses at our business (s-corp), which we dissolved in Sept. of last year. Our attorney has told us not to worry about the $5,000 as our trustee would most likely let us keep it.

We met with our CPA yesterday for our tax preparation. We did not tell him we had filed for BK.

He explained to us that because our s-corp was only a few years old and the business failed, he may be able to go back and reclaim the money we paid in taxes in 2006 (for 2005, the first year of the s-corp) and 2007 (for 2006). This would add about $12,000 to our $5,000 refund we are estimating....$17,000!

Since the extra $12,000 was not tax withheld the year we filed (2007), it was actually from taxes we paid in 2006 & 2007 for the previous years, what do you think our odds are on keeping it?

My guess is...we're screwed.

[woohoogirl]

I'm having a hard time wrapping my brain around that figure, so this might be stupid of me, but couldn't you just wait until after your discharge to file?

[Lindsay]

Can you file for the original amount and amend the taxes later? Also, can you wait until next year to recoup the business loss?

[ssdsco]

Any exemption dollars left ?

I would have thought being declared "no asset" met the trustee didn't want anything including the tax return.

[epiphany]

I'm having a hard time wrapping my brain around that figure, so this might be stupid of me, but couldn't you just wait until after your discharge to file?

excellent idea, woohoogirl. Does the trustee want to see your tax return? IF YOU CAN, get an extension until october and wait until after your discharge to file.
EP

[yoyoma51]

Interesting idea. According to our trustee, we have to tell him about any 'windfall' we receive 6 months from the filing date.

For us, that would only be until about the end of May.

Huh....gonna have to check into that...

[epiphany]

Interesting idea. According to our trustee, we have to tell him about any 'windfall' we receive 6 months from the filing date.

For us, that would only be until about the end of May.

Huh....gonna have to check into that...

Getting an extension on filing taxes is every tax payers legal right. Those that owe money are still supposed to estimate what they would owe and send in the money.

To file an extension, you just have to fill out a form, which you can do online at the gov's website. Sorry, I don't have that link. I did it last year and it is really quite simple. That would give you until Oct 15th (would verify that, could be a day or two off as I haven't checked the calendar) to file your taxes. Wait 6 months, or more to be safe, from filing date, file, boom..receive your money.

If I was in your situation and no one was asking to see my 2007 returns, that is exactly what I would do. Don't know how early you can file for the extension...may have to wait until closer to or very near the April deadline, I am just not sure.

Definitely look into it.

EP

[danaf]

I would consider filing original without a cpa, and then ammend later (with the cpa). I think you have more than 6 months to ammend. I don't think filing an extension on the eve of bk will work out and actually just the opposite - the trustee could prolong your case until he sees your return. good luck on what you decide. Tough spot to be in.

[epiphany]

I would consider filing original without a cpa, and then ammend later (with the cpa). I think you have more than 6 months to ammend. I don't think filing an extension on the eve of bk will work out and actually just the opposite - the trustee could prolong your case until he sees your return. good luck on what you decide. Tough spot to be in.

Ummm, either I am not following you are you are not following me...

If I read the OP's post correctly, she will be six months from initial filing of BK at the end of May....case should be discharged by then. (see her sig line) She would not be filing for an extension of taxes on the eve of BK....she's already in that process. She would file for an extension of taxes close to the due date that taxes are due in April. Again, case should be discharged by then. If no one has asked, or does ask, to see her tax returns for 2007, she should get the extension IMO. If someone does ask to see them, then she can file at that time. But it sounds to me like she is in the wrap up process and the odds are in her favor.

EP

[woohoogirl]

Okay, now that I've got a little bit more of my act together....you could theoretically file your taxes on April 15 and not have your refund direct deposited and that would add at least a few weeks until you received your refund. That would make it May, and that should be in the clear. Unless you've got to show your tax returns to the trustee, I think that might be the way to go. But if you do have to show them, I'd file a straightforward no frills return, and amend it later. According the the IRS website you have 3 years to amend a return.

[rfassett]

Filing returns

This notion of intentionally filing an inaccurate return is wrought with danger. Already the bankrupt party is operating somewhat under the microscope. So before you file your tax return, read the line right above your signature. It says something to the effect that by signing below you are declaring that the information provided on the tax return is true and accurate to the best of your knowledge. Signing a return that is known to be inaccurate is nothing less than committing perjury. (In fact, in the industry, that statement is referred to as the "perjury statement".) The good news here is that there is no reason to go down that road. The present case states that an approximate refund in the amount of $5,000 will be forthcoming. If that is true, I would recommend, as the other posters have, that a legal and legitimate extension of time to file be submitted. This is an automatic six month extension - no questions asked. Since there is a troubled business involved (and by the way, the S-Corp return is due March 15th and can be automatically extended for six months also, to September 15th) it would not be a stretched to think that it will take additional time to compile the information to file a correct return. That is the story I would give to any one involved with the bankruptcy, ie, trustee. If he/she asks what you think the refund will be, you simply state that a return has not been prepared and you are not certain that there will even be a refund. And until the return is prepared, that is the truth. The CPA could very well have missed some recapture issues or something else that would change the refund estimate. It happens. As to the refunds that will be generated by carrying the current year net operating loss back to previous years, let me give you some very solid advice. Disclose your bankrupty to your CPA. You may lose some of these tax attributes by mechanism of the bankruptcy. And even if you can carry the loss back, think this through very, very carefully. Did you list that potential refund as an asset on your bankruptcy petition? Not likely, but since the taxes are being refunded from pre-bankrupty time, you may not be entitled to those monies. Talk to your CPA. I am thinking that the tax attributes (net operating loss carryback) are eliminated in bankruptcy. It is very, very important that you disclose this to your CPA because you may be involving him/her in the snare and he/she could very well be assessed a preparer's penalty for filing an inaccurate claim for refund.

[yoyoma51]

I e-mail our lawyer last night regarding this issue.

He replied this morning telling us we can keep it, but we have to amend our petition.

He said that even though we are keeping LOTS of assets (two nice and paid for! cars, a newer moped, some cash, all the household stuff, etc.), we should have sufficient 'wild card' exemptions left to cover it.

All because we owe what our house is worth, therefore we get the 'wild card' to use on other stuff/$$.

Whew. Life is good. And we continue to be thankful for our attorney. Couldn't imagine not having him on our side.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless (my wife does, and she’s probably right). Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.