12K tax return dont know what to do

[fas917]

Hi,

I am think on filling in a few months, but received 12k in return due to investment property. I dont have a lawyer yet. Setting up appt for lawyers.

Do I have to include 12k toward my income to means test?

What should I spend this money on?

I filed joint tax return and only I will file for BK Ch 7. I am panicking that I may not qualify for ch 7 because of my huge tax returns. Any thoughts.

Thank you.

[momof5]

Not sure if this is true for every state but we had to include our $9000 income tax return as part of our income. (it was for our benefit though as we would have had 0 income) Our case was a little different though as my husband was unemployed and was not yet collecting unemployment.

Others can probably answer your questions better but I wanted to throw my situation in case you can relate.

[JollyGG]

Typically an income tax return should not count as income.

The reason being that your means test and your six month look back on your income are based on your GROSS income. Normally, a tax return would be part of your salary that you overpaid in taxes and the govenment is returning to you. That income was already counted when you initially earned it (part of your gross income) therefore it shouldn't be counted again when it is returned to you.

Yes, I do know that some districts and some trustee's insist on counting income tax refunds as income. However, they are wrong and a good lawyer needs to contest that practice.

However, considering this return is due to investment property I really don't know if that is considered any differently or not.

[Cali]

I would think if it is has to do with investment property, then it would be considered part of the income. Now if it is personal income tax, it wouldn't(or shouldn't) be counted.

[deafbroke]

Talk to an attorney before filing.

[fas917]

Well, I took about 50k loss on my investment property that I had to foreclose. This is why I got 12k tax return.

I am just panicking right now. If I have to add my tax return as income this will put me well above state median for NY.

Thank you all. I will be talking to few lawyers soon.

[monkatom]

FYI Just because you are over the median does not automatically mean anything bad it just means you may have to pass the means test.

[diviaruba]

Typically an income tax return should not count as income.

The reason being that your means test and your six month look back on your income are based on your GROSS income. Normally, a tax return would be part of your salary that you overpaid in taxes and the govenment is returning to you. That income was already counted when you initially earned it (part of your gross income) therefore it shouldn't be counted again when it is returned to you.

Yes, I do know that some districts and some trustee's insist on counting income tax refunds as income. However, they are wrong and a good lawyer needs to contest that practice.

People here keep perpetuating this myth, as if it is an either/or situation. While the calculations for the six months prior do in fact tally gross income, the amount of taxes incurred is backed out further down the form. If the amount of taxes shown (whether calculated on the basis of withheld taxes or best estimate of taxes actually incurred, depending on local district custom) exceeds by a reasonable amount the true tax liability, the refund (please, people, the return is the 1040 document filed, the refund is the amount of taxes overpaid) can and should be folded back into the monthly net disposable income. Big refunds are nothing more than a give-back of excess taxes paid that, had the proper withholding taken place, would have been incorporated into net after-tax income on an ongoing basis. That makes them fair game for the "bottom line" calculation of the means test monthly disposable income.

[Cali]

This is why our w/holding is higher and we hardly get anything back.

Big refunds are nothing more than a give-back of excess taxes paid that, had the proper withholding taken place, would have been incorporated into net after-tax income on an ongoing basis. That makes them fair game for the "bottom line" calculation of the means test monthly disposable income.

[CindyLou]

People here keep perpetuating this myth, as if it is an either/or situation. While the calculations for the six months prior do in fact tally gross income, the amount of taxes incurred is backed out further down the form. If the amount of taxes shown (whether calculated on the basis of withheld taxes or best estimate of taxes actually incurred, depending on local district custom) exceeds by a reasonable amount the true tax liability, the refund (please, people, the return is the 1040 document filed, the refund is the amount of taxes overpaid) can and should be folded back into the monthly net disposable income. Big refunds are nothing more than a give-back of excess taxes paid that, had the proper withholding taken place, would have been incorporated into net after-tax income on an ongoing basis. That makes them fair game for the "bottom line" calculation of the means test monthly disposable income.

I know this is off subject, but its funny you said that about return vs. refund thing. It is a HUGE pet peeve of mine when people call it a "tax return"....don't know why but its always bugged me.

[butterflywings]

This is why our w/holding is higher and we hardly get anything back.

More often than not, large tax refunds are the result of the EITC and CTC tax credits and have nothing to do with withholding.

My dh and I got back $7300 in Feb and our withholding was right on with what we owed. Nothing more, nothing less. Almost to the penny in fact.

Our refund was based on those 2 credits.