Where does my tax refund fit?

[sillywalks]

I am working on my forms, and I'm not sure where I fit my tax refund into form 22A (means test)? I am planning on filing in February. Last year I got back around $3000K federal and $1900 state. I'm anticipating around the same amount (I did a preliminary tax return, and I'm at $2900 federal) with this return, which I will file as soon as I can.

I know I have to account for that amount on the means test (the look back). My understanding is I can divide my return by 12, then use that monthly amount for my 6 month look back (so ~5000/12=400 a month). So, I need to factor in $400 a month for the last 6 months. I think it will be okay, because without that amount, I am currently coming out with -$1596 a month. I just am not sure where to put in the amount from my tax return? Does anyone know?

Thanks!

[free2breathe]

Ok, from what I've read, it's about as clear as mud ;)
From this site: http://www.abiworld.org/committees/n...means_test.pdf you see that "In addition, courts have come to differing results on income issues raised by retirement distributions, amounts paid by persons other than the debtor for household expenses, income tax withheld from paychecks and funds returned as tax refunds."

Then further on there is a case quoted: "In re Durczynski, 405 B.R. 880 (Bankr. N.D. Ohio 2009). In examining the income side of the means test in a chapter 7 case, the U.S. Trustee sought to dismiss the debtors’ case under the totality of the circumstances because, among other things, the debtors averaged about $3,000 in yearly income tax refunds. The Court agreed that tax refunds constitute a source of income so long as there is a realistic prospect of similar refunds in the future."

So, what I would think is that if you want to avoid any questions, you could list it on line 10 as "other income", and yes, I would divide the average refund by 12 and list 1/12th as monthly income. The other thing would be to see if there is any case precedent in your district that addresses the issue.

[tcreegan]

Hi sillywalks, Hi f2b,

The UST actually says no tax refund on line 10 on means-test....

http://www.justice.gov/ust/eo/bapcpa/docs/ch7_line_by_line.pdf

Although I swear there was a line for it when I filed, now I don't see a place for it anywhere on the forms....maybe it is something the trustee has to pursue, a cash asset to the BK estate.

Ran across an interesting case...debtor filed tax return right before BK, marked the refund as 'apply to next years taxes' ...so no refund, nothing for trustee to grab..court agreed. Graves No. 08-1462 10th Cir.

...maybe there is hope after all...

Tom in Colo

[free2breathe]

Tom = Guru ;) Thanks, Tom. I searched and searched for that! We didn't list ours, but I didn't want to lead someone astray and I always tend to err on the side of caution. I'm glad you had a link that we can trust!

There is a spot for tax refunds on the Statement of Financial Affairs, Question 2

[tcreegan]

I knew it! there has to be a line for it somewhere!! Thanks for the sharp reading skills, f2b!!

Tax refund goes on line2, statement of financial affairs. Now I know.....

Tom in Colo

[sillywalks]

Ok, from what I've read, it's about as clear as mud ;)
From this site: http://www.abiworld.org/committees/n...means_test.pdf you see that "In addition, courts have come to differing results on income issues raised by retirement distributions, amounts paid by persons other than the debtor for household expenses, income tax withheld from paychecks and funds returned as tax refunds."

Then further on there is a case quoted: "In re Durczynski, 405 B.R. 880 (Bankr. N.D. Ohio 2009). In examining the income side of the means test in a chapter 7 case, the U.S. Trustee sought to dismiss the debtors’ case under the totality of the circumstances because, among other things, the debtors averaged about $3,000 in yearly income tax refunds. The Court agreed that tax refunds constitute a source of income so long as there is a realistic prospect of similar refunds in the future."

So, what I would think is that if you want to avoid any questions, you could list it on line 10 as "other income", and yes, I would divide the average refund by 12 and list 1/12th as monthly income. The other thing would be to see if there is any case precedent in your district that addresses the issue.

Thanks, freetobreathe. I have already changed my withholdings so that very little is being taken out of my checks (I did this in October). It is possible that I will owe a little next year, even. Hopefully, that will help prevent this issue!

[sillywalks]

Hi sillywalks, Hi f2b,

The UST actually says no tax refund on line 10 on means-test....

http://www.justice.gov/ust/eo/bapcpa/docs/ch7_line_by_line.pdf

Although I swear there was a line for it when I filed, now I don't see a place for it anywhere on the forms....maybe it is something the trustee has to pursue, a cash asset to the BK estate.

Ran across an interesting case...debtor filed tax return right before BK, marked the refund as 'apply to next years taxes' ...so no refund, nothing for trustee to grab..court agreed. Graves No. 08-1462 10th Cir.

...maybe there is hope after all...

Tom in Colo

Hmmm...well, that is an option! I am planning on using my refund to prepay my car insurance and stock up on staples for the year (including that expensive cat food!). But, if it's a problem, it's good to know I could defer it!

[sillywalks]

I knew it! there has to be a line for it somewhere!! Thanks for the sharp reading skills, f2b!!

Tax refund goes on line2, statement of financial affairs. Now I know.....

Tom in Colo

Thanks free2breathe (and Tom, as always!).

K