Question about keeping tax refund...in Texas...

[JEM]

Everything has *finally* fallen into place for us to file this month. Our appt. to go over all off our paperwork and take the class is in a week and a half.

My question is our tax refund. I've talked with the attorney in the past about this and he said we would exempt it. (We're in TX, but going to use Federal exemptions) He said we could use the wildcard and unused homestead to exempt any cash. (Which would only be our refund) My rough estimate shows us getting around $3000 back.

If we exempt it, can the trustee elect to take it anyway? Or try to? Or demand we turn it over first, THEN give it to us?

We really, REALLY, REALLY need this. Our van needs some work done that we've been putting off for quite some time. I need a filling, dh needs a tooth pulled, and I need a crown on a tooth that I should have had one put on two years ago. Well, now that "temp tooth" cracked. Our AC for the house needs a new coil (it's leaking or something??) So we NEED the money.

I guess if it came down to it, we'd get our refund and then file. But only if there was no other way. Dh was served in October. We haven't heard anything since, but I'm sure they got a default judgment. Someone has been trying to serve me papers this week (they left a card on the door twice).

So I don't really want to put this off any further.

[free2breathe]

If the exemption is available and your refund falls within the scope of that exemption, you should be fine. There can always be objections to exemptions, but they have to have some basis. The trustee can't just say, "I don't want to give you that exemption, so I'm going to take it away." The objections I've seen are usually for assets that a debtor is trying to exempt for which there are no legal exemptions, or for which the debtor has overclaimed the exempt amount. For instance, in our state, tax refunds are not exempt, and we are not allowed to claim federal. If we'd claimed it as exempt, then we would have faced the objection I'm sure.

eta: Federal Bankruptcy Exemptions - 522(d)(5) - $1,075 of any property, and unused portion of homestead up to $10,125 <---this is what your attorney is referring to.

[justbroke]

The Trustee can't elect anything. The Trustee can, however, question the exemption if you are not entitled to it under the Statute that your attorney uses. If your attorney says that it will be exempted, trust your attorney. I would not, however, start spending it "in you mind" until your petition is prepared and the attorney has actually exempted the funds.

If you are filing your bankruptcy after you have received your anticipated refund, then you can spend down the refund on necessities and it will not cause any problems. Just keep receipts! It's normal to spend a refund on the attorney himself, car repairs, home repairs (not "upgrades"), doctor, dentist, food, clothing and anything else considered a non-luxury! Fill the car up with gas even! Stock up on food! Get that tooth taken care of!

[JEM]

The Trustee can't elect anything. The Trustee can, however, question the exemption if you are not entitled to it under the Statute that your attorney uses. If your attorney says that it will be exempted, trust your attorney. I would not, however, start spending it "in you mind" until your petition is prepared and the attorney has actually exempted the funds.

If you are filing your bankruptcy after you have received your anticipated refund, then you can spend down the refund on necessities and it will not cause any problems. Just keep receipts! It's normal to spend a refund on the attorney himself, car repairs, home repairs (not "upgrades"), doctor, dentist, food, clothing and anything else considered a non-luxury! Fill the car up with gas even! Stock up on food! Get that tooth taken care of!

If we have to, and there is ANY question as to whether the trustee would try to take it, we will get our refund back and spend it on those items and then file. But that puts filing off another month. (we usually get our refund back mid Feb.--which would be before our 341 meeting I'm sure)

We have plenty (PLENTY!) of room in our exemptions. So the refund would easily fit into the wildcard and the unused homestead.

I'm just getting SO NERVOUS (yet anxious for it to be OVER). I don't want any surprises. Losing our tax refund would be awful.

[free2breathe]

Just a little note here. If you itemize deductions, your tax filing will be delayed until approx. mid Feb according to the IRS site.

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

*Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
*Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
*Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

[JEM]

Just a little note here. If you itemize deductions, your tax filing will be delayed until approx. mid Feb according to the IRS site.

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

*Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
*Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
*Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

We won't be able to itemize this year. We've missed being able to for the last 2 years. Turbo Tax did say that one of the forms wouldn't be available until mid January though--which I'm sure we won't have dh's W2 till then anyway.

[free2breathe]

That certainly helps your timeline then. Like jb says, trust your attorney. If he is confident that your refund will be exempt with the federal exemptions, you can be confident as well.

[tcreegan]

Hi JEM,

If you don't need the homestead exemption, you are covered about twice over. Not a problem.

Tom in Colo

[JEM]

Hi JEM,

If you don't need the homestead exemption, you are covered about twice over. Not a problem.

Tom in Colo

We don't need any of it. LOL. We owe about what our home is worth. Thankfully we're not underwater like so many homes are....but we certainly don't have equity.