IRS Refund

[bigsapper]

I don't think my twist on this has been discussed, so here goes...

I owe IRS $15k for tax year 2008. Initiated a C13 early 2009. Granted 12/2009. Converted C7 a few months later.

2009 tax showed a $12k overpayment. IRS notified that the overpayment would not be applied to 2010 estimated taxes. Cool; figured that would grab it for 2008.

Friday (4/30) receive court notice of C7 discharge. Saturday (5/1) receive the $12k overpayment as a refund check.

Is this a trap? Would the court have a conniption if I deposited this check into my bank account?

(and yes, I'm awaiting a response from my attorney.)

TIA

[readytofile]

They didn't apply this 12k to your 2008 taxes because at the time you filed your taxes you were still in the bankruptcy and they cannot attempt to collect on debts owed while you're in the middle of bankruptcy proceedings. Now that you're discharged they can come after you again....and they will. Do yourself a favor and send them the check for 12k and apply it to your 2008 taxes.

Edited to add: I owed taxes when I had filed as well. I had money taken out of my account every month for it and as soon as I filed they stopped taking the payments and confirmed with me over the phone that they could not come after me for the money until the bankruptcy proceedings were over but that bankruptcy would not discharge that debt. It merely put it off for a short time.

[HHM]

You may deposit the funds, but DO NOT spend them until you get the clear from your attorney. The key question is not that you are dishcarged, but is whether you case is CLOSED? If the case is still open, which I suspect it is, you will probably be getting a request from the BK trustee to turn over that refund. All you need to make sure is that IRS files a proof of claim in the chapter 7 so that money goes to pay that debt.

As a practical matter, you SHOULD use it to pay the 2008 taxes anyway.

[bigsapper]

Oh, no doubt. That money is going to pay off the IRS. Between that and the money that was paid via the C13 plan, I should be close to putting that all behind me.

But here's the deal. In order for me to pay the IRS, I will have to deposit this in my bank account first. I'm coincerned about the BK Court viewing this as some kind of windfall payment if I do that.

I know I would have to have reported it *before* my discharge. I'm wondering if I have to now.

ETA: Missed it by "that" much. Thanks HHM.

[readytofile]

Can you just sign the back of the check and mail it back to them? They should be able to just take the check and sign it themselves for deposit I would think.

[ToughSpot]

If your plan is to just give it back to the IRS you can and should endorse check and give it back to the IRS. If you are near any IRS office with counter service you may want to hand deliver it and get a receipt. If it were me I would just do it, you may want to clear it with your attorney first.

[bigsapper]

Well I was kinda hoping to deposit it for 30 days. My checking acct pays 4%.

[readytofile]

I wouldn't take the chance.

[bigsapper]

Spoil sport.

[readytofile]

Yeah yeah yeah I know ;)

[GettingGoing]

Well I was kinda hoping to deposit it for 30 days. My checking acct pays 4%.

4% interest on 12k that you only hold in your account for a month really isn't going to do much.

[bigsapper]

4% interest on 12k that you only hold in your account for a month really isn't going to do much.

Absolutely: True
Relatively: ????

[LadyInTheRed]

Well I was kinda hoping to deposit it for 30 days. My checking acct pays 4%.

Where do you bank??!!

[bigsapper]

ViewPoint Bank

It used to be a credit union.