Can Trustee Take 2 Years of Tax Refunds?

[ques]

Hi Everyone,

We filed Chapter 7 on April 29th, 2011
(no assets, retaining home by paying through)

Meeting of Creditors (341) is scheduled for June 2, 2011

We received a letter stating to bring our 2010 Tax Returns with a list of how the money was spent. (I was expecting this part, and have the list...all spent on "exempt" things...including paying our bankruptcy lawyer). The unexpected part, is the part that states the trustee may also ask us for our 2011 return when we file.

I was told that Earned Income Tax Credits were exempt from being taken. Is the "Making Work Pay" Credit considered exempt? Or is it completely different than an EITC? Our "refunds" last year were $1400 ($800 was Making Work Pay Credit).

Anyone know how many months post-discharge your Trustee can keep watch over and request your tax refund?

Thanks!

Ques

[IHateToBeEmo]

Since you filed at the end of April, it's possible the trustee will want one-third of your refund next year. He could say you filed one-third of the way through the year and so two-thirds of it are yours and one-third of it is his. Hopefully he won't do this, but that's the only excuse I can think of for them to want your refund next April!

[daylate]

FYI-the making work pay credit does not exist for 2011 so yoru refund will most likely be less. One way to avoid having to give up a refund next year is make sure you don't get one!!! Adjust your withholdings so you have less taken out. If your refund this year was 600 not counting the "make work pay" divide 600 by the number of pays you have remaining in the year and adjust your w'h's so that much less is withheld. Absolutely no reason to get a refund next year;you have plenty of time to make the necessary adjustments. Keep in mind that for 2011 the personal exemptions and standard deductions are slightly higher and the tax brackets are a bit broader so factor that in. Also factor in any increase or reduction in expenses or income. Good luck.

[Clabbergirl]

My lawyer said it's standard procedure to provide 2 years of tax returns - regardless of whether there's a refund or not. Could just be part of the process.

[ques]

Thanks for the input everyone!

Changing our withholding allowances sounds like a good idea (we do claim more withholding than necessary). I didn't know if that would prompt the trustee to look at us like we are trying to be deceitful or not (hide an asset). We easily qualify for Chapter 7, so having a bit more coming home on each pay check wouldn't hurt our ability to file Chapter 7. I just don't want to "tick off" our trustee...or give him any reason to scrutinize us too much. Our lawyer said we got a "nit-picky" trustee. Fun, huh?

Thanks again! Love this forum...been reading/learning for nearly a year now on here. It feels good to finally have filed

ques

[daylate]

You won't tick off your trustee-change your exemptions-use the extra $ smartly-you are just doing what everyone should do-theoretically no one should ever get a refund, although for those of us who a few extra $ burn a hole in their pockets its kind of like a forced savings-just not 2011 for you. Nit picky or not what you would be doing is completely legal.

[btbeme]

Move your current witholdings into an IRA or other retirement account.

Our Ch 7 was discharged in 2010. We had no taxes in tax year 2009 and no witholdings in tax year 2010. However, tax law changed in 2010 and we received an absolutely unexpected REFUND on on carryover tax credit from 2007 to the tune of $13,000. Since we filed in August 2010, the Trustee tagged us for 60% of it. We had no idea that is was coming, and neither did the Trustee...but there it went.

Bottom line - ANY tax witholdings or refunds due to you, whether received or otherwise, at the time of filing, are fair game.

[HHM]

Supplying 2 years of tax "returns" does not mean the trustee gets 2 years of tax "refunds." It is merely informational. Generally, a trustee in chapter 7 only gets 1 year worth of tax refund if they are entitled to it at all.

[tobee43]

we were asked for 3 years of income tax returns...( i guess that was so the trustee's office could verify how we went down the drain with job loss and medical bills..ie.. wanted proof we how much we made or didn't and how much we spent and claimed on medical etc. ). it was just for verifiation reasons. it also showed to the trustee that we were forthright and honest and claimed and were able to backup our situation.