IRS holding refund?

[PoorGrammyinBK7]

I was wondering if this is typical? I checked on the status of our refund with the IRS and it said it was "delayed". Well today, we found out the IRS is holding our 2008 tax refund (about $1200). We called, they said it had to do with the BK - and we were given a number for "insolvency" (which we have not yet called). Since we have not been notified by the court of anything regarding our tax refund, I wanted to check in with you guys first to see if this is something others have had happen or if it is routine. We do NOT owe the IRS anything. And we really need this money.

Still have not called to see why our BK has not closed. PACER still says "no asset" and awaiting closing. Nothing else has been filed. Its almost 6 months from discharge. I haven't called anyone yet to ask why but maybe I will get the courage up to do so soon. Do they ever just "lose" a file?

[filedsept18]

Happened to me as well - called the insolvency line and they manually cut the refund check directly to the Trustee.

[HHM]

Unless you have an exemption, kiss that refund good-bye, sorry.

[justbroke]

They did the same to me, but they released the check and there was no actual delay in my check processing.

Their systems automatically attempt to recover money, but with a Bankruptcy, the insolvency department gets involved. The IRS has had serious sanctions on it for violating the automatic stay, so the IRM (IRS Manual) specifically reads that IRS Agents are to immediately determine if the IRS has a "case", and if so, to immediately file for a motion from the automatic stay before the use their right of setoff.

So, you should call the bankruptcy (insolvency) department and see if it just needs a manual release. I even still owe the IRS $3K and they released my entire check. They didn't setoff one penny!

But, some Trustees have the IRS hold the money so that the Trustee will get it before you do.

[AngelinaCatHub]

I still owe the IRS 27K. When the stimulus checks went out, they scoffed up mine right on so I only got a letter. It offset about 2K. I sent my letter to the Trustee so he would know I was not withholding a check. Nothing was said about it and I was discharged without event. 'Hub

[NoMoreRed]

Same thing happened here. Trustee told us that we need to send the check to them when we receive it. I looked it up and called the IRS and they said that it would be sent directly to the Trustee. We typically receive a $5000/yr refund, but I adjusted my withholding at the beginning of 2008 to help make ends meet by getting a bit more cash in each check. This end up making our refund only $500. Win for me....loss for Trustee.

[PoorGrammyinBK7]

Our 2008 refund was never mentioned by the trustee. We only got about $200 the previous year and didn't expect much for 2008, so we were surprised it was that much. I just don't understand why we never got any notification if the trustee wants it. And nothing shows on PACER. But I will try to call that number again. Last time I tried it was a 30 minute wait and I only have a cell phone.

[freshstartfl]

Mine is being held as well. I'm not sure if it's b/c of my BK. Like you, my refund never came up -- not between my lawyer and I, and not at the Trustee's meeting. I am discharged AND closed -- I didn't prepare my taxes until I was closed. Now my refund is being held. I need to call them tonight, as well. Please post your findings, and I'll do the same.

[PoorGrammyinBK7]

Mine is being held as well. I'm not sure if it's b/c of my BK. Like you, my refund never came up -- not between my lawyer and I, and not at the Trustee's meeting. I am discharged AND closed -- I didn't prepare my taxes until I was closed. Now my refund is being held. I need to call them tonight, as well. Please post your findings, and I'll do the same.

Well, I called the number and got a recorded message asking me if the return had been filed less than "6 to 8 weeks" ago. (I am thinking less than 6 or less than 8? duh) So I answered by pressing 1 (yes it was filed less than 6 weeks ago - barely). Then she came back on and said the IRS won't even TALK to you about it until it has been at least "6 to 8 weeks" Maybe I should have lied.

How ridiculous is that?

I guess the government is in worse economic shape than we thought if they are holding on to people's refunds and won't even talk to people as to why. I do not like the "change" and am losing "hope" fast!!!

[CurtInKS]

My attorney told me that our return would be gone, so back in April, when I was forced to resign from my job, my wife bumped her deductions way up, and I did the same when I started teachin in August. Our federal refund is only $120.00 so the trustee can have it. Our state refund is $108.00 and I assume since we owe the state $565 from last year, they will apply that to the balance before the trustee can get it. Does that sound right? My accountant who does my taxes said he can get our deductions set for next year, so our refund is almost nothing, but we get more take home. No reason to loan the Government money tax free.

[Cali]

At least you are suppose to get a refund. We had to pay 1850 this year in taxes.

[PoorGrammyinBK7]

UPDATE on tax return:

Finally got through and was able to talk to a real person. She said it was probably automatically held back just because of the BK. However, she said the hold was manually released and a CHECK had been mailed to my address back in April. (We had requested it be sent electronically to our bank account).

Well, we have never received it.

So, she sent me a form to fill out, which I just got today - which we both have to sign and fax in, letting them know we did not receive the check. Then, they trace it. If it has been cashed, there will be yet another packet sent to us with the steps to do next.

The form says you have to sign it EXACTLY as you signed the original form. Well, we "signed" with a pin number online. Never actually wrote our signatures on paper and mailed it - it was done electronically. (See, everyone has been telling me that was the best and fastest way to get your refund - NOT!!!). I guess I will have to call again and waste another hour or so on finding out what they want us to do as far as "signing" it "exactly" like it is on the return.

If someone has been able to cash that check, then it may be months or even longer before we would get it.

Well, I called the number and got a recorded message asking me if the return had been filed less than "6 to 8 weeks" ago. (I am thinking less than 6 or less than 8? duh) So I answered by pressing 1 (yes it was filed less than 6 weeks ago - barely). Then she came back on and said the IRS won't even TALK to you about it until it has been at least "6 to 8 weeks" Maybe I should have lied.

How ridiculous is that?

I guess the government is in worse economic shape than we thought if they are holding on to people's refunds and won't even talk to people as to why. I do not like the "change" and am losing "hope" fast!!!

[PoorGrammyinBK7]

Another update:
About 2 weeks after we faxed the form, we finally got the check. No letter or anything, but thank God we got it!

[freedom7]

how does the IRS even know that you are bankrupt? The only way they should be holding checks is if you owe them or another government agency money. If the trustee was to get your money he/she would have to declare your case an asset case, if i am not misunderstanding and then could pursue the refund, but if discharged/no asset, then you should be entitled toyour refund unless you owe uncle sam or another federal offset program.

[aljohnson007]

When you file bk, every Fed, State and County taxing agency gets an automatic notification. I checked my property tax records a few days after I filed and there was a big red flag blocking access and saying to call the tax appraiser for info. The State and IRS suspends transactions as well. I checked again one day after my discharge and all was normal.