Non-taxable "income"

[number5]

Does non-taxable income that is on your paycheck, count against your median income and/or means test?

I.e., you're working away from home, and your company either reimburses you for certain things, or gives you an allowance. Current paystubs have a car rental reimbursement (we pay first, then they reimburse us) and a meal per-diem (they give us a certain amount for a meal allowance, don't have to deal with receipts). In the past we've also received a housing allowance. Oh, and a travel allowance/reimbursement. Now, on the paystub these items are either shown under the Earnings heading with an asterisk that says "Excluded from federal taxable wages", or under a separate section labeled as a Reimbursement.

Of course, we're still paying for our house back home (mortgage, utilities, insurance, etc.). If we weren't, then all these allowances/reimbursements would be taxable. Once we're able to file for bankruptcy, we will have been unemployed for a number of months, so I shouldn't have to worry about how this could mess up our schedules of expenses and what-not.

[number5]

Anyone?

[SunshineGal]

I have no idea, hopefully someone with more experience will answer this.

But, since I happen to be looking at the means test I thought I would give you my thoughts.

Line 4 of the meantest asks for income of the operation or a business or profession, less expenses. If it were me, I would think expense re-imbursement gets added on line 4a, and then expenses deducted on 4b, for a net income of 0.00. That way you've disclosed the income and get credit for the deductions.

Again, this is just a guess.

[Maine]

I am waiting to hear back from my lawyer on this exact question. I will let you know what I hear. (Should be early next week as he is out of the office until Monday.) If you find out more please post it. This question is one of the ones that worries me the most!

[justbroke]

Does non-taxable income that is on your paycheck, count against your median income and/or means test?

Yes it does. The definition of "current monthly income" -- which is part of the Means Test -- makes no statement about income that is non-taxable. As a matter of fact, it reads income from all source "without regard to whether such income is taxable income".

I.e., you're working away from home, and your company either reimburses you for certain things, or gives you an allowance.

If this appears in your gross income, then it is income. If it's a reimbursement for actual expenses and is not included on your W-2 or as your gross income on your paystub, then it is may not be income.

I would venture to say that since it's on your paystub and included in your "regular" income, you must include it. However, you should have a corresponding "expense" to offset this amount. The downside is that you will probably be over the median, if you travel alot. The upside is that you should still pass the means test, because it should be a wash.

This is a tough topic and I'm sure it differs by District and maybe even Trustee.

[number5]

Yes it does. The definition of "current monthly income" -- which is part of the Means Test -- makes no statement about income that is non-taxable. As a matter of fact, it reads income from all source "without regard to whether such income is taxable income".

If this appears in your gross income, then it is income. If it's a reimbursement for actual expenses and is not included on your W-2 or as your gross income on your paystub, then it is may not be income.

I would venture to say that since it's on your paystub and included in your "regular" income, you must include it. However, you should have a corresponding "expense" to offset this amount. The downside is that you will probably be over the median, if you travel alot. The upside is that you should still pass the means test, because it should be a wash.

This is a tough topic and I'm sure it differs by District and maybe even Trustee.

Well, the paystubs at the current company has stuff all over the place. I see one that has the rental reimbursement listed under Earnings as Car Allowance. Another time it was under Adjustments as a Reimbursement. Travel has been put under Adjustments, and also under Other. The one thing that's a constant, is the meal allowance is always put under Earnings and is listed as Per Diem.

I can ask the current company if it'd show up on a W-2. Last year none of the allowances (non-taxable) showed up on the W-2, but it was with a different company.

If it did count as actual income...I wonder if they'd take into consideration the higher cost of living here? About an extra $20,000/yr (according to the median income test). I doubt it...we'd probably have to claim residence here, which would incur a bigger tax bill (the reimbursements/allowances would then be taxable).

Ah well, just one more thing to ask the lawyer when we find one.

[HHM]

Well, you should be hiring an attorney for your case. This is where the means test becomes an art form.

Assuming that we are talking about (for the most part) expense reimbursement and you actually incur the related expenses, then I would NOT put it on the means test; however, you should disclose an explanation in the notes and be prepared to show that you actually incurred the expense. i.e. if the company pays you a rental car reimbursement, then you should have corresponding rental car receipts. etc.

If this additional income is more like per diem and not a direct expense reimbursement, you are in a more tricky position. That would definitely count as income for the means test. If it pushes you over median, then on step II of the means test, use the higher expense categories and explain the situation.

[number5]

Just an update. Called a handful of attorney offices today. Couldn't find one that'd agree to a phone consultation. They all wanted us to show up in person.

Did talk to one paralegal though who answered some of my questions (attorney was out, she said he'd call back a week from Monday...dunno if he'd do a phone consult or not, but we have our fingers crossed). She jumped right on the question, said they had that come up a few weeks ago or so, and they had to ask the US Trustee. They were told to only count taxable income. Now, I was only asking about the median income...once we're able to file we won't still be receiving a paycheck, and shouldn't have to worry about it going on our income/expense schedules.

Also to note, she didn't answer all of my questions. Several just received a "you'll have to talk to the attorney about that" answer. The ones she answered, she said she was 99% sure and then went on to explain. Basically, I didn't get the feeling she was making up stuff.

Hope that helps someone.

[HHM]

Just an update. Called a handful of attorney offices today. Couldn't find one that'd agree to a phone consultation. They all wanted us to show up in person.

Not sure that should be a surprise, after all, attorneys are NOT legal help lines

[number5]

Not sure that should be a surprise, after all, attorneys are NOT legal help lines

I'm not sure what you mean?

I was asking for a phone consultation. I thought I'd read time and time again, on this very site, that someone considering bankruptcy should meet with multiple attorneys for a free consultation. Would it really be more abusive if this initial free consultation was done over the phone instead of in person?

Due to the nature of our work, we spend half the year or more away from home. An attorney who would be willing to work with us under these conditions would be a benefit. We've had to handle legal stuff before while away from home...things are handled via email or postal mail.

It could be that bankruptcy is simply different. One office said that legal advice couldn't be given over the phone (what if we had an emergency and called?). Another said we had to physically be there for the consultation because they had to check our ID (I asked if there was a way we could just do a video conference, so they could see us and our IDs at the same time, but that was a no go as well).

Basically, I had a few questions I needed answered before we determined what to do next. Should we push as hard as possible for an extension to the current work contract, or just keep our mouths shut and head back home? Now, the paralegal couldn't answer all our questions, but answered enough that I think it might be best to keep low and go back home. If the lawyer does call and will do an actual consultation over the phone...well that'd score some major points for him. I'd probably do another consult or two, but if he seems good, and is willing to work with us no matter where we're at, odds are we'd go with him.

Quick note...I know we'd have to show up in person for the 341 (unless someone tells me different), so no need to remind me of that

[jennilynn]

I'm not sure what you mean?

I was asking for a phone consultation. I thought I'd read time and time again, on this very site, that someone considering bankruptcy should meet with multiple attorneys for a free consultation. Would it really be more abusive if this initial free consultation was done over the phone instead of in person?

Due to the nature of our work, we spend half the year or more away from home. An attorney who would be willing to work with us under these conditions would be a benefit. We've had to handle legal stuff before while away from home...things are handled via email or postal mail.

It could be that bankruptcy is simply different. One office said that legal advice couldn't be given over the phone (what if we had an emergency and called?). Another said we had to physically be there for the consultation because they had to check our ID (I asked if there was a way we could just do a video conference, so they could see us and our IDs at the same time, but that was a no go as well).

Basically, I had a few questions I needed answered before we determined what to do next. Should we push as hard as possible for an extension to the current work contract, or just keep our mouths shut and head back home? Now, the paralegal couldn't answer all our questions, but answered enough that I think it might be best to keep low and go back home. If the lawyer does call and will do an actual consultation over the phone...well that'd score some major points for him. I'd probably do another consult or two, but if he seems good, and is willing to work with us no matter where we're at, odds are we'd go with him.

Quick note...I know we'd have to show up in person for the 341 (unless someone tells me different), so no need to remind me of that

There's paperwork that needs to be filled out, sometimes attorneys want to see payroll, taxes, etc. And - legal advice if you have not retained an attorney is not usually given over the phone at all. Once a client retained the office I worked for, THEN we can discuss via phone. It's very difficult to deal with bankruptcy matters over the phone and at a minimum, you will have to view your schedules, review them with the office and sign them. Also - there's rules that the attorney must follow, and in the wake of the "new" bankruptcy code that is now 5 yrs old - there are forms and disclosures the attorney has to hand you... that would most likely be why they are wanting an in person appointment for the consult.
Good luck. I can tell you that the income issue may vary by district... technically the code requires ALL SOURCES OF INCOME. if it's a direct reimbursement, you paid $500 for a car rental, and they gave you $500 two weeks later - that wouldn't necessarily be income. However if you receive $500 for meals and per diem for you "time away"... and you didn't spend $500 on meals - that could be income.

One example is the Military. They receive "taxable base pay" of x dollars a month. They also receive Basic Allowance for Housing. It's nontaxable, but it is an allowance and therefor income. It counts on the means test. As does any hazard pay, etc. when they are overseas... but they dont' pay taxes on it to the IRS or State entities... but it is income for purposes of the means test. Definately something to sit dow and discuss with an attorney to make heads or tails of your specific situation.

[justbroke]

jenny quite accurately conveys the difference between "actual reimbursement" -- which is what my company does -- and "per diem". They are two different things. The latter is income in every case, and the former is income only in certain IRS defined cases. As noted, the bankruptcy code actually reads that it doesn't care about taxable status of income.

I would guarantee that if the United States Trustee (UST) saw you receiving sizable "per diem" expenses, that would be counted as income.

I would only discuss this with an attorney face to face.

[number5]

jenny quite accurately conveys the difference between "actual reimbursement" -- which is what my company does -- and "per diem". They are two different things. The latter is income in every case, and the former is income only in certain IRS defined cases. As noted, the bankruptcy code actually reads that it doesn't care about taxable status of income.

I would guarantee that if the United States Trustee (UST) saw you receiving sizable "per diem" expenses, that would be counted as income.

I would only discuss this with an attorney face to face.

Yes, it is listed as per-diem, and yes it is sizable. Could be district-specific, could have just meant it didn't count toward median income but would on your schedules...or the paralegal could have been mistaken.

I had checked the values for the mean test in this area...and while this area is allotted an additional $20k/yr for median income...for household expenses (including groceries) the amounts are exactly the same. Very strange, as food items tend to be 50% to 100% higher in cost here. Even things with the price pre-printed on the package will have a special sticker put over it with a different, higher price.

I dunno...I haven't been keeping receipts, and we're actually about to start paring down our grocery spending (buy a bunch at the beginning, then let it dwindle down just before leaving). Perhaps I could buy a few token items just to have proof of the price? $4.70 for half gallon of milk, 79cents/lb for bananas, etc.

Anyways...based on the information (or lack thereof) I have, I think we're just going to see what happens. If extension is offered, and they can pay us extra for the plane tickets we already bought, then we'll go ahead with that. If not, then just don't say anything and go back home, and meet with some attorneys face-to-face.

Thanks for the help everyone. It is frustrating that we're not 100% sure of the best course of action...but such is life.