After discharge tax refund question?

[OhioFiler]

I was answering a similar question in another thread and want to offer this info: the penalty for under withholding is just interest--at a reasonable rate (someone was thinking there was a 25% penalty!) for the amount under withheld. And there's no penalty at all if you cover 90%. So under withhold, worst case, you'll owe 3 or 4% of the amount under withheld to the IRS. Over withhold and get a refund and you risk 100% to the trustee. It's easy money to the trustee because so few people adjust their withholding. It's also 100% avoidable.

The only catch is that you will need the balance in April to pay the IRS.

Or you could work out a payment arrangement with the IRS.

The only 100% risk the petitioner has is if he/she files BK in January but has not yet received his prior year refund. After January the risked portion of the refund is lowered 8.33% each subsequent month.

Your plan is a wise one. Unfortunately, most people planning bankruptcy aren't looking at their tax withholding rates as a tool to improve cash flow and retain more assets. Most are simply watching the mail for bills and ignoring the phone calls from collectors.