Will I have to prove expenses?

[BBW]

I make less than the median income for my state. I can prove some of my expenses but not others. I rent from my parents> I pay my rent by check, but utilities in cash. My car is registered to my mom and on her insurance she is the driver(I am the only one on the loan and title) but I pay $100 in cash to her each month which is my cars portion of ins. I have my own policy with my EX's car on it (loan, reg, title in her name) and she is listed as the driver, but I pay $170 by check for it.

So when I fill out my sched J will I have to prove all this stuff? Can I count this stuff? I'm so confused.

[leena]

I make less than the median income for my state. I can prove some of my expenses but not others. I rent from my parents> I pay my rent by check, but utilities in cash. My car is registered to my mom and on her insurance she is the driver(I am the only one on the loan and title) but I pay $100 in cash to her each month which is my cars portion of ins. I have my own policy with my EX's car on it (loan, reg, title in her name) and she is listed as the driver, but I pay $170 by check for it.

So when I fill out my sched J will I have to prove all this stuff? Can I count this stuff? I'm so confused.

Do you have an attorney? Ask them, they will tell you about any expenses you might need to prove up on. My attorney did not feel I would need to prove any expenses. I am a below median filer as well.

[BBW]

Thanks. I am thinking that this is like filing your taxes. If you have a $500 phone bill or $900 car payment that would raise an eye brow. As long as your expenses are within the norm they usually aren't questioned right?

[Amy26]

Yes, you should be fine. A lot of people were told here to keep receipts for everything they purchased because they would have to justify what they spent their money on. I was not asked for any receipts, no justifications and no inqueries as to what I spent my money. Keep in mind individual results may vary... lol.

Most people's bank statements are pretty clear as to what was spent. Unless your bank statements say things like ATM WITHDRAWL over and over. If you were consistently just taking your money out of the ATM frequently, then maybe then they would want explainations.

[leena]

I was told that the receipts thing can come into play for above median filers, for people who consistently live cash-only (no accounts to document), for self employed people (because it is hard enough to document income somethimes that the trustees like to document everything) and for people with unusual expenses. Other than that, no receipts needed.

I even have a situation with my bank accounts I was told would be fine. I had to get out of Wells Fargo bank per my attorney at the end of August (they freeze your account when you file). So, I got my paycheck cash, paid my rent, and used the rest on normal expenses. I did not keep receipts. Attorney said it was no problem. I started doing regular banking again on September 11th. I will submit the statements showing the date of filing for my past and present accounts.

So, if that is ok I am sure you are just fine!

[backtoschool]

I made a high income before I was laid off, but in the six month look back period I was way under the median. My trustee asked me about individual line items on my bank statements (several deposits and withdrawals over $1,000) but didn't ask me about anything I purchased, and didn't want to see receipts. He did want an explanation of where my large tax refund went and he wanted to know how I spent the deposits over $1,000.

[BBW]

My only deposits over $1k are my pay checks. I don't have any single withdrawals more than $1k. I am also curious about taxes. I file Head of Household 1 or 2. But I withhold from my check H4 or 5. Basically I end up with a very small return because I have gotten extra in my check each week. Will the trustee have a problem with this?

[nc73]

Do they not check your bank statements to see what expenses you had? Surely that would be the most accurate way. Unless it was paid with cash.

[leena]

Do they not check your bank statements to see what expenses you had? Surely that would be the most accurate way. Unless it was paid with cash.

In general, yes but I was told that if you are under median, they are not in most instances looking at those even too hard. They really just want your schedule J to look "reasonable" for expenses-and those expenses are suppose to be based on an "average" per month, not always "See! On my bank statement I spend exactly 200 bucks on food in August!"

[leena]

My only deposits over $1k are my pay checks. I don't have any single withdrawals more than $1k. I am also curious about taxes. I file Head of Household 1 or 2. But I withhold from my check H4 or 5. Basically I end up with a very small return because I have gotten extra in my check each week. Will the trustee have a problem with this?

They are not so much concerned about your claiming to many deductions as they are claiming too few. Some people will claim too few deductions to get a big return. That can make it look as though you are trying to reduce your net pay to help you meet the second part of the means test if it applies to you, which measures your actual take home income against your expenses. In addition, the trustee can go after those large tax returns for the year you filed.

If anything, in having too little withholding might actually cause the trustee to take your future tax liability into the considerations of your expenses, or it will have no effect at all.

[backtoschool]

In general, yes but I was told that if you are under median, they are not in most instances looking at those even too hard. They really just want your schedule J to look "reasonable" for expenses-and those expenses are suppose to be based on an "average" per month, not always "See! On my bank statement I spend exactly 200 bucks on food in August!"

This depends. If you were under the median in your six month look back period, but over the median on your last several year's tax returns, the trustee may look very closely at your expenses and income.

[Amy26]

This depends. If you were under the median in your six month look back period, but over the median on your last several year's tax returns, the trustee will look very closely at your expenses and income.

Dunno if I agree with that. At least I did not have that problem. I made well over the median income for at least the last 6 years. I was unemployed for a little over 7 months before I filed. So, I pretty much went from having great income to no income. I was not questioned, inquired or had anything looked at.

I think they realize that people unexpedidly loose their jobs and are having a difficult time right now getting new ones.

I also have typically claimed between 6-8 withholdings on my taxes over the years.

[leena]

This depends. If you were under the median in your six month look back period, but over the median on your last several year's tax returns, the trustee may look very closely at your expenses and income.

Yes, I can definitely see that. I also think you got one of those incredibly cranky trustees, and you may actually have a lot of those in your district. My attorney said that back 15 years ago, he practiced in another state for a few years and they raked everyone who was not an obvious deep poverty case or went into the trustee in a wheelchair and casts over the coals and back again. I am not gonna say which state, though because I do not want to scare anyone here with one persons opinion and old information!

[BBW]

They are not so much concerned about your claiming to many deductions as they are claiming too few. Some people will claim too few deductions to get a big return. That can make it look as though you are trying to reduce your net pay to help you meet the second part of the means test if it applies to you, which measures your actual take home income against your expenses. In addition, the trustee can go after those large tax returns for the year you filed.

If anything, in having too little withholding might actually cause the trustee to take your future tax liability into the considerations of your expenses, or it will have no effect at all.

Gotcha. Makes sense. I was thinking about going from H5 back to H4 (I went up to 5 a few months ago) so I don't owe the IRS, but I hadn't considered it would lower my take home pay and help when I file. I think I'll do that H4 is still far more withholding.

[iv65536]

As far as tax withholding is concerned, I try to nail it dead on. However, if the trustee asks in my case, I am thinking of this: end of the tax effects of the 2009 stimulus bill and the end of the 2001 tax bill, which would combine to add about $75 to $80 per month in tax expense. And I used these when I tried to figure a hypothetical 13 plan.

What's more, by my figures, I estimate the amount my income taxes are reduced because of mortgage interest deductions to be about $110 per month combined federal and state.