Why do they need tax forms?

[pcn]

The attorney I am going to see has requested copies of my last 2 years tax forms. What do they need them for, or what do they look for? Thanks!

[BassBoy]

The attorney is looking to see if you would be an asset case. If you normally get a big return, the Trustee may want a portion of that and that's the asset in your case. Your creditors will each get something from the asset. For example in our case: My wife and I usually got between $4K and $5K every year and because of that, we were an asset case. When we filed the following year, we had to surrender a portion of our return to the Trustee. Now because we didn't write off mortgage interest, property taxes and such that year, our return wasn't as big and we had to surrender $676 over to the Trustee.

[pcn]

Hmm. Well last year was very unrepresnetative, we claimed a large loss and got back around 9k. But this year we claimed more exemptions to increase take home pay (and no loss) and it looks like we will get back about $700. So is it better to wait this year till after we file so we arent an asset case? Thanks for the input!

[phigment]

For example in our case: My wife and I usually got between $4K and $5K every year and because of that, we were an asset case. When we filed the following year, we had to surrender a portion of our return to the Trustee. Now because we didn't write off mortgage interest, property taxes and such that year, our return wasn't as big and we had to surrender $676 over to the Trustee.

So even after a CH7 case is discharged you have a liability to the Trustee? Does this go on for a set number of years? What if you're a no asset case?

[justbroke]

The attorney I am going to see has requested copies of my last 2 years tax forms. What do they need them for, or what do they look for? Thanks!

Adding to what BassBoy wrote, your tax return reveals many many things that you may not have disclosed. Everything from business income, rental income, interest income, savings to 401(k) or other retirement instruments. It also shows your typical deductions, property taxes paid, state income taxes paid, and a host of other useful information.

Add to that, the fact that you submit IRS returns subject to audit and subject to a penalty of perjury, it's basically a an unsworn declaration of your financial condition.

[BassBoy]

So even after a CH7 case is discharged you have a liability to the Trustee? Does this go on for a set number of years? What if you're a no asset case?

No. The liquidation of an asset, like IRS refund is just the year following your BK filing.

If you are a no asset case, then there's nothing to worry about. Your refund is yours to keep.

[JRScott]

You are required to list the current years tax information and previous two years as part of the filing. That is the primary reason the lawyer wants it and ultimately the Trustee will probably see it too.

If you file in the first or second quarter of a year it is unusual for your tax return to be held the following year. However if you file in the third and fourth quarters of a year it is normal for the trustee to seek the tax return unless it can be exempted.