Federal Tax payment disposable income expense

[Floridagail]

A friend is getting ready to file 7, She owes 4000 fed tax for 2012. Can you make payment aggmts with IRS and use this as some of her disposable income to lower her disposable income to qualify for 7?

[ld2366eh]

My attorney saw that I will owe about 4500 next year when I file my taxes and since it meant that I was under withholding, and did not have an opportunity to adjust my withholding, he divided it by 12 and listed it as an expense on schedule J. I can only assume every district is different and she should consult her attorney.

[ld2366eh]

I should also mention that for the tax portion of the means test, he took my tax estimate of total federal taxes owed for 2012 and divided it my 12 (also took into consideration total social security Medicare and state taxes and divided those by 12 as well. My 341 was in November, so far no questions have been presented by the US trustee.

[LadyInTheRed]

Line 25 of the means test says:

Other Necessary Expenses: taxes. Enter the total average monthly expense that you actually incur for all
federal, state and local taxes, other than real estate and sales taxes, such as income taxes, self-employment
taxes, social-security taxes, and Medicare taxes.

I read that to mean you enter the tax that you incur, even if withholding was too low or too high. So, if her income and withholding were the same all year and she is getting a $4,000 refund, her monthly taxes on line 25 should be 333.33 more than was actually withheld. If she were getting a $4,000 refund, than that amount should probably be increased by the same amount.

[Floridagail]

I understand the withholding, but the actual taxes owed 4000, Can it be considerated a allowable expense as a payment to lower the disposable income in chptr 7?

[justbroke]

When completing the Means Test (Form B22A) you would list it on line 49 (payments on priority claims). However, you would take what is owed and divide by 60 (as if you were going to pay this off in a Chapter 13). Unpaid taxes are considered "priority claims" if they are not subject to discharge. (They would be subject to discharge if they meet the 3 part test; were due more than 3 years before filing, the return filed more than 2 years before filing, and it was not a tax assessed within the last 240 days.)

So, the $4,000 would yield a $66.67/month expense (over 60 months).

[Floridagail]

Thanks JB, at least it counts somewhere.

[Floridagail]

If you are behind on the mortgage by 10K , would you list it there also divided by 60 also?

[ld2366eh]

I think it's line 43 on B22A. But you may only be able to use this if you are planning to remain in the home (not surrender it). I'm sure the experts can confirm this statement...

[Floridagail]

Thanks for info, I refered her to make a list for her attorney, she is driving me crazy.

[LadyInTheRed]

Thanks for info, I refered her to make a list for her attorney, she is driving me crazy.

Good idea. These kind of details are best left for the attorney to work out. You could also have her register here and ask her own questions.