Accounts receivable

[Trixie007]

Sorry - I don't mean to say that falls into the same category as the cash thing, just that I've been told (online and by my attorney) that if you pay months in advance, that's an asset, the same as security deposits, etc.

[kathy4530050]

I think you're right.

[jb300]

I wonder how paying estimated taxes would fall then? Some of this money coming in is for estimated taxes and sales tax, I don't see how they can keep money that I need for those things. The food idea is a good one.

[StartingOver08]

Kathy the Trustee is not going to touch money that you have paid to the IRS for estimated income or sales taxes.

I suppose the Trustee could - but as a practice they do not because the taxes are a priority debt.

[anuta]

I have a seperate tax bank account that I set up a year ago. When I receive payments from clients I depost the portion due to state,federal estimated & employee taxes as well as gross receipts. Since I am "saving" it in this account and then paying each quarter or monthly (depending on the tax) How does this get handled in BK? For example, we will be filing in Aug. My quarterly tax payments would be due in Sept. Will the trustee take that money that I have saved to pay taxes. It's not my money--it belongs to the various tax agencies. If the trustee does take this money, do I just go delinquent on that quarters taxes? The account was never used for anything other than taxes.

[jb300]

anuta
Registered User



Join Date: Jan 2009
Posts: 9 I have a seperate tax bank account that I set up a year ago. When I receive payments from clients I depost the portion due to state,federal estimated & employee taxes as well as gross receipts. Since I am "saving" it in this account and then paying each quarter or monthly (depending on the tax) How does this get handled in BK? For example, we will be filing in Aug. My quarterly tax payments would be due in Sept. Will the trustee take that money that I have saved to pay taxes. It's not my money--it belongs to the various tax agencies. If the trustee does take this money, do I just go delinquent on that quarters taxes? The account was never used for anything other than taxes.

I had this same question with the 1st attorney I saw because it was in early April and he told me I had taxes due the 15th and quarterly sales tax due the 30th of April and he told me I would have to pay that in before I filed or the Trustee could get it. I could have no more than $1000.00 in cash or accounts for the day I filed.



StartingOver08
Registered User
B/F Guru



Join Date: Oct 2008
Location: South Florida
Posts: 2,345 Kathy the Trustee is not going to touch money that you have paid to the IRS for estimated income or sales taxes.

I suppose the Trustee could - but as a practice they do not because the taxes are a priority debt.

I was told that any money I know will be coming even though I haven't been paid yet the Trustee could take. That is what concerns me because every dime of money that I have coming in is for sub contract labor, taxes, sales tax or my bills.

I have no extra money or I wouldn't be in this mess.

[StartingOver08]

Jb - there are two different issues going on in this thread so it is confusing.

1) Your question on the A/R - yes all A/R as of the date of filing belongs to the Trustee and there is no provision for removing expenses out of A/R at the time of filing.

2) Tax issue. People that have funds set aside to pay their income and sales tax must pay those funds prior to filing - or they will lose the $$ to the Trustee. If the funds are paid a little early the Trustee is not likely to go after the tax funds as taxes are a priority debt.

[jb300]

I am sorry if I am not understanding this. I have jobs I know are coming up, not done yet so no money collected. If I file before I have these jobs done is that money available to the trustee?

Then on the day I file, I have jobs completed, haven't received the check yet but know it's coming. Is that the money the Trustee can get and what about the money that will be coming in that check that rightfully belongs to my state for sales tax and wages my sub contractors have earned?

[StartingOver08]

Ok, here is a good definition of A/R: Money which is owed to a company by a customer for products and services provided on credit. This is treated as a current asset on a balance sheet. A specific sale is generally only treated as an account receivable after the customer is sent an invoice.

http://www.investorwords.com/52/accounts_receivable.html

You have a complication - because you generally (I assume from your description) collect a percentage of your fee upfront upon contract execution. These are funds that are paid to you in advance of the work.

You may need to space your accepted contracts so you have a period of time where you do not enter into a contract to allow for the filing date.

Funds that are currently owed to you by jobs that are completed and NOT YET PAID by the filing date belong to the Trustee.

Jobs in progress where you have funds on deposit that have not been spent on materials or services prior to the filing date - the Trustee is going to want those funds.

This is very complex when you are a contractor. You have other issues if someone gives you funds for materials and labor and you do not spend the money on materials and labor. You need a very experienced BK attorney to work with you on this aspect as it will be an issue in your BK.

[jb300]

That does help because I can time this. I have jobs coming up that I have not started yet that money for the materials was paid directly to my broker for materials in a check made from my customer to the broker. I can hold that job off for a few weeks to file. I can get all of my other jobs collected for and then pick that day to file.

The way I am working my company now is I require customers to pay for their materials up front to either me or the broker directly. I carry no balance for materials. No money for materials, no materials ordered. I work strictly on a no credit basis.

Then until that job is installed no money is collected for the labor. Who's to say that something may happen and I can't complete the job. If they have purchased the materials either through my broker or myself they can still find someone else to install the job. As long as the only money I collect for is the materials money and that money is used immediately to buy their materials there shouldn't be a problem should there on that angle? I would also have the documentation to prove I collected the sales tax and that money will be sent in for sales tax at the appropriate time. If the sales tax issue was going to be a problem I am sure if I contacted my state taxing authority and told them my situation they would have no problem taking my money early for that quarter to date.

[StartingOver08]

Discuss this in great detail with your attorney. If you are under contract - the Trustee will consider those funds as belonging to the BK estate. That is why you must clear your strategy around all the landminds!

[jb300]

You have other issues if someone gives you funds for materials and labor and you do not spend the money on materials and labor. You need a very experienced BK attorney to work with you on this aspect as it will be an issue in your BK.


I have always paid my labor but part of the reason I got to where I am today is that when I first started this business 2 years ago now we used to let people tells us what they wanted and then we ordered it on my credit.

I had large credit lines and was able to get another one. Well as you can imagine what happened, jobs would get delayed a month or two, people wouldn't pay and to just get by we would have to use some of the money coming in to just live. Fuel went up last year and some months I was using over $1000.00 a month for just fuel. So that is where some of my CC charges are from. Jobs supplies etc. I have made no charges since Oct. of last year though and put an end to doing business that way. It was hard for some of my old customers to change but that was the only way I could continue.

I just got too far in to get out. Nothing was intentional here and I fought filing BK until I just couldn't find any other way out. I hope I am not going to get put through the wringer for making a stupid mistake and the effects of the gas prices and grocery prices going through the roof

. I just need this over. I have a medical condition I have had for over 30 years that stress makes it worse and I am feeling the stress of this and I was hoping to have the worst of this over in a month or two.


These were all on personal CC not Business

[jb300]

No contracts either on my jobs.. I just send out an estimate, nothing is signed, they just purchase the materials from me or my broker and I think for awhile I may make everyone go through my broker and then when we go to do the install they pay us.

I am just going to have to watch my jobs for a little bit until we get through this.