Refund Question Chapter 7

[gatekeeper]

My CPA has filed my 1040a tax return for the 2010 tax season, according to my tax return I should received a tax refund of $3000.00 for the 01/01/2010 to 12/31/2010. I do understand that the trustee wants my refund, but the trustee also has to filed a 1041 tax return as well.

The IRS said I should get a tax refund on 03/08/2011 by mail, but is now being delayed due to there being a hold due to my bankruptcy case, which the trustee stated that the IRS will mail my refund to her office.

I am trying to figure out how much I will get back out of my refund. According to my calulations I should get at least 29& back and the trustee get 71% of my refund, but do this this additional 1041 tax return being filed by the trustee, I am kinda wondering what happens next? Does the 3000 dollar refund stays the same or will it change due to the 1041 tax return that the trustee files and would any of this mess up my 1040a tax return.

[tcreegan]

Hi gatekeeper,

...boy, I am lost. You/CPA filed a tax return, then the trustee filed one on top of that? Can the trustee pre-empt your tax return?

Tom in Colo

[free2breathe]

I believe I've read that the trustee has to file a return with the IRS on behalf of the bankruptcy estate. I haven't had the heart or head to dig into it more deeply, but I do know that is one of the jobs they have. Uncle Sam wants his piece of every pie, you know ;)

Found this on a Tax Almanac site:
Taxation of Bankruptcy Estates of an Individual
The bankruptcy estate that is created when an individual debtor files a petition under either chapter 7 or 11 of title 11 of the U.S. Code is treated as a separate taxable entity. The bankruptcy estate is administered by a trustee or a debtor-in-possession. If the case is later dismissed by the bankruptcy court, the individual debtor is treated as if the bankruptcy petition had never been filed.

[gatekeeper]

I kind of figure it out. The form that the trustee uses to notify the IRS that my refund is the property of the trustee is called 1041 tax return. I was kind of confused as to why the trustee would submit a 1041 tax return on me, when I had already filed a 1040/1040A tax return and had agreed to turn over my refund check.

I was kind of thinking that filing two times (one by me, and the other by the trustee), but the way it was explain to me about an hour ago by my CPA is that the trustee, when they determined that your tax refund is sufficient enough to be used to pay some of your creditor, the trustee would take your 1040 or 1040A tax return and then filed a separate 1041 tax return to claim that refund, in hopes that the IRS has not yet send out your refund. I was told that my refund dated was changed do to the trustee filing a 1041 tax returnand that this process can take up 6-9 weeks, to allow the IRS to determine as to whom gets the refund check.

At first, when I pulled up a copy of the 1041 tax return, I was think that I was being double tax or that my CPA did something wrong on my tax return. But doing some additional research, I found that it standard procedure for the Trustee to file a 1041 tax return, the only thing that they fill out as to what the amount of taxes you owed and what your deductions amount was and the amount of the refund that you are due.

This must be why the trustee always wants to see the tax return you filed most recently and any other returns that you had filed during the bankruptcy proceedings.

[gatekeeper]

Hopefully, the IRS will release the funds to the trustee quickly, so that the trustee can close out my case. I already received my discharge, which makes me happy. Now, it almost time to clean up my credit reports.

[daylate]

Gatekeeper- freetobreathe has it right. the 1041 is the bankruptcy estate's return. it would be filed if the trustee had sold your car or other possessions. Not just because of your refund.
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