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    Question about filing around tax refund time?

    When I started looking into BK, I realized it would have to wait until we had some $$ for attorney fees. I did consider pro se for a bit but ultimately decided I'd rather go the attorney route. I think I MAY be able to handle it myself but with a toddler and being pregnant (will have a newborn in march) i just don't know if I want to tackle such a project.

    So.....we won't have any extra money until tax refund time. I was hoping to be able to use THAT for attorney fees. However.....I'm starting to wonder now, if that will be a problem? We pass the means test and all, have no cash on hand, no savings, the only thing we have of any real value is hubby's truck, nothing else in our names. But if we suddenly come into some money in March will that throw a kink into our eligibility? Would we need to wait months later AFTER receiving the refund to file?

    #2
    Frpm what I have read here paying for your attorney with your tax refund is an acceptable practice. if you will have anymore of your income tax refund left after paying your lawyer you will need to spend it down on allowed exemptions or be prepared for the TT to seize it. Ask your lawyer he will be more than happy to guide you.



    Meatstick

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      #3
      you'll be fine using the refund for attorney's fees. The trustee can't take a refund that was given to you before you file. They only take ones after you've filed.

      Depending on the closeness to return and your 341- he may ask what you spent the money on. And you can easily say "attorney's fees" and any possible extra could be explained as necessary household items: groceries, clothes,heat etc.

      Originally posted by lindsay2181 View Post
      When I started looking into BK, I realized it would have to wait until we had some $$ for attorney fees. I did consider pro se for a bit but ultimately decided I'd rather go the attorney route. I think I MAY be able to handle it myself but with a toddler and being pregnant (will have a newborn in march) i just don't know if I want to tackle such a project.

      So.....we won't have any extra money until tax refund time. I was hoping to be able to use THAT for attorney fees. However.....I'm starting to wonder now, if that will be a problem? We pass the means test and all, have no cash on hand, no savings, the only thing we have of any real value is hubby's truck, nothing else in our names. But if we suddenly come into some money in March will that throw a kink into our eligibility? Would we need to wait months later AFTER receiving the refund to file?
      Filed Pro Se: 10/16/2009
      341 Scheduled: 11/23/2009
      Last Day for Objections: 1/22/2010
      Discharged: 1/28/2010

      Comment


        #4
        Just a quick note on what my attorney said (you may already know this)...the refund WILL be counted as income so be prepared to add it and make sure you still fall under the median.

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          #5
          Originally posted by lalap123 View Post
          Just a quick note on what my attorney said (you may already know this)...the refund WILL be counted as income so be prepared to add it and make sure you still fall under the median.
          How is this possible, this is just a refund on the tax that was witholded from the income you are already reporting.

          Comment


            #6
            Originally posted by Depressed View Post
            How is this possible, this is just a refund on the tax that was witholded from the income you are already reporting.
            I believe because it's "over withholding". Therefore, if you are getting a refund, you were having too much taken out of your paychecks, which would have been DMI.

            Comment


              #7
              Originally posted by JEM View Post
              I believe because it's "over withholding". Therefore, if you are getting a refund, you were having too much taken out of your paychecks, which would have been DMI.
              I could see where that is the case and an adjustment could be made to "taxes" under the deductions section of the means test. This wouldn't change 'income" however.

              Comment


                #8
                The TT assigned to my case sent me a letter with specific instructions regarding my 2009 taxes and any refund I may get.

                I have to file within 40 days of my 341, not a problem, I will have filed before my 341.

                I cannot efile. I wil have to paper file this year both fed and state.

                He will let me know if I can keep any or all of the refund, if I get a refund and I get the check before he has sent me his decision, I have to forward the check to him without endorsing the check.

                Failure to follow his instructions on this matter will result in a dismisal of my case.

                My attorney told me if the refund is over $1000, I will lose it.

                We shall see.

                Comment


                  #9
                  I'm planning to use mine to pay legal fees.

                  Comment


                    #10
                    Originally posted by Depressed View Post
                    I could see where that is the case and an adjustment could be made to "taxes" under the deductions section of the means test. This wouldn't change 'income" however.

                    Yes, from my understanding....the refund is added back in to monthly income. For instance, if you received a $1200 refund, it would be divided by 12 ( which equals $100/mo) and added to your monthly income.

                    Comment


                      #11
                      Originally posted by lalap123 View Post
                      Just a quick note on what my attorney said (you may already know this)...the refund WILL be counted as income so be prepared to add it and make sure you still fall under the median.

                      I have never added in tax return income as income on the means test. Never had a problem.

                      When you think about it, an income tax refund is not new income, it is a return of income already received. Furthermore, if you were to file today, you would have to list your gross income from wages, which would already include that portion of the taxes that you are receiving back (it was taken out of your pay, and is not excluded when listing your gross income on the means test). If you were to list the tax refund too, it's like you're double counting the income.

                      Think about it this way ... and I'm using sample numbers for the full calendar year.

                      My gross wages: 50,000.00

                      My tax refund: 5,000.00

                      Now, did I make 55k for the year? Nope. I made 50k.

                      Under your scenario, you made 55k ... but the extra 5k really came out of the 50k and is not added to the total you grossed. It's a return of money paid out of the 50k.

                      Comment


                        #12
                        You don't practice in GA by any chance do you? I'm guessing that there are many differences in interpretation among not only states but also districts. I'm just fortunate to be in one of those *lucky* districts where they have told me to include everything.

                        How do you handle "income" from items sold on Ebay, Craigslist, etc.? I've read many times that if all items were household/yard sale type items you are essentially not making a profit on after fees, etc. that it isn't technically income. I talked to one attorney who blew it off, but another who said it has to be included. The one I ended up retaining is the one who said not to worry about it, b/c if it goes on there I'm over the median and have to do the means test. If the trustee objects to not including it the worst that can happen is that he makes me do the means test, right? I'm pretty sure I will pass it, but it still makes me nervous. Could he dismiss my case?

                        Comment


                          #13
                          Originally posted by BnkrptcyLwyr View Post
                          I have never added in tax return income as income on the means test. Never had a problem.

                          When you think about it, an income tax refund is not new income, it is a return of income already received. Furthermore, if you were to file today, you would have to list your gross income from wages, which would already include that portion of the taxes that you are receiving back (it was taken out of your pay, and is not excluded when listing your gross income on the means test). If you were to list the tax refund too, it's like you're double counting the income.

                          Think about it this way ... and I'm using sample numbers for the full calendar year.

                          My gross wages: 50,000.00

                          My tax refund: 5,000.00

                          Now, did I make 55k for the year? Nope. I made 50k.

                          Under your scenario, you made 55k ... but the extra 5k really came out of the 50k and is not added to the total you grossed. It's a return of money paid out of the 50k.
                          Here is how *I* thought they would do it....(I'll use the same numbers you did)

                          Gross income $50K

                          Taxes $5K

                          Net income $45K

                          Tax Refund $5000/12=$466 in "over withholding" a month.....added back in for the purpose of figuring disposable income on Schedule J.

                          However, I know for US, we get back less than we pay in. This year, I think we'll have paid in @ $4000 in taxes, and probably get a $2400-$2500 refund. Obviously, what the government kept wouldn't be added back in, just the amount of our refund.


                          Am I wayyyyyy off??

                          Comment


                            #14
                            I anticipated this was going to be an issue last year and plenty of room left in my exemptions. I had my attorney exempt "anticipated" tax return for me and my wife.

                            Husb. $3000.00k
                            Wife: $3000.00k

                            You would immediately be told by the trustee if this was acceptable or not. I had no problem and received all my return in 2009 to the tune of 6k.

                            Comment


                              #15
                              Originally posted by JEM View Post
                              Here is how *I* thought they would do it....(I'll use the same numbers you did)

                              Gross income $50K

                              Taxes $5K

                              Net income $45K

                              Tax Refund $5000/12=$466 in "over withholding" a month.....added back in for the purpose of figuring disposable income on Schedule J.

                              However, I know for US, we get back less than we pay in. This year, I think we'll have paid in @ $4000 in taxes, and probably get a $2400-$2500 refund. Obviously, what the government kept wouldn't be added back in, just the amount of our refund.


                              Am I wayyyyyy off??
                              However, for the purposes of the means test and determining whether or not you are above/below median, you use GROSS wages ... and so to include a tax refund (assuming the only income you had were your wages) would be ridiculous, to me. Like I said, I have NEVER included it, and NEVER got an objection.

                              Comment

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