Taxes? Can I file Married but separate after BK?

[CreatureShop]

Hi, Hubby and I finally received our discharge (6 months after filing), but now we look at taxes. Normally, we receive a large refund, which the trustee wants to see. Our lawyer instructed us to claim more exemptions... so we claimed 12 according to the IRS website after we used their calculator to try to balance out our taxes to $0... nothing owed nothing due. Well, it doesn't look like their calculator correctly gave us zero. Now, we either get a huge return (possibly close to $6k) and need to turn it over to the trustee if we file "married filing jointly", or if we file "married filing separate", it will be small (about $1600)... possibly small enough that they may not want it.

So my questions: Can we file "married filing separately" for one return and then go back to filing jointly the subsequent years? Is this not allowed because the trustee wants to see a "regular" return? Did your lawyers ask you to file together or separate? Does the trustee always take the whole thing? Just getting an idea of what we're looking at.

[forgotten]

Shouldn't matter how you file, as long as you file legally. Both methods of fileing are valid and legal, so you can do it any way you would like.

How much of the refund is taken varies by trustee. Some take it all, some want it over a certain dollar amount, some don't want any.

On another note... how in the heck do people get such large tax refunds? I only claim 1 exemption and we are scheduled to get back about $300. I'm clearly doing something wrong....

[newbie2]

I think I'm missing something here...did you file your bankruptcy jointly or just one of you? That could be the key answer as to whether the trustee will want to see a joint tax return or a "married filing separately" return.

Pick up the phone and call your attorney. You surely don't want to do anything incorrectly at this point.

[momofthree]

On another note... how in the heck do people get such large tax refunds? I only claim 1 exemption and we are scheduled to get back about $300. I'm clearly doing something wrong....

How many kids do you have? We have 3 and they're a huge deduction! You get an additional exemption for each warm body, plus the child tax credit, plus daycare expense deduction, etc. Of course, they cost a fortune in upkeep throughout the year though, lol.

[forgotten]

How many kids do you have? We have 3 and they're a huge deduction! You get an additional exemption for each warm body, plus the child tax credit, plus daycare expense deduction, etc. Of course, they cost a fortune in upkeep throughout the year though, lol.

Yeah... im a victim of the "can't have children tax". Paid $25k in various taxes throughout the year, get $280 back since we aren't able to have children the money goes to those who can.

[CreatureShop]

I have 4 children. Yeah, they shouldn't punish those who aren't able to have children. =(

Called my lawyer and the answer was, "I don't think it makes a difference." I live in Nevada and I thought I read somewhere that they want to see separate returns and I can't find it. I know that she said it was an asset case probably because of our tax return, but we also were letting the house go. Who knows, but you are correct, I definitely don't want to mess anything up at this point.

[CreatureShop]

Well, I found my answer (I believe) by reading the U.S. bankruptcy code on this website:
http://www4.law.cornell.edu/uscode/11/ It is the Title 11 U.S. Code. Very Helpful.

http://www.law.cornell.edu/uscode/se...l?terms=filingseparate returns&url=/uscode/html/uscode26/usc_sec_26_00006015----000-.html

(4) Limitations on separate returns disregarded
If an item of deduction or credit is disallowed in its entirety solely because a separate return is filed, such disallowance shall be disregarded and the item shall be computed as if a joint return had been filed and then allocated between the spouses appropriately.

Basically, I take this as meaning: I shouldn't file a separate return because the marriage credit of filing jointly disallowed the deduction in its entirety solely. I guess. There are always exceptions etc. but since my lawyer had the "I don't think it matters" stance... I'll just be safe and file jointly.

[CreatureShop]

Ah, but this is on the IRS website regarding bankruptcy and tax returns:

"Individuals in Chapter 7 or 11
If the debtor is an individual who files for bankruptcy under chapter 7 or 11, the bankruptcy estate is treated as a new taxable entity, separate from the individual taxpayer.

The estate in a chapter 7 case is represented by a trustee. The trustee is appointed under the Bankruptcy Code to administer the estate and liquidate any nonexempt assets of the estate. In chapter 11, the debtor often remains in control of the assets as a “debtor-in-possession” and acts as the bankruptcy trustee. See Taxes and the Bankruptcy Estate, later.

If the debtor filed a chapter 7 or 11 case, the debtor must file a Form 1040 for the tax year involved. The bankruptcy trustee files a Form 1041 for the bankruptcy estate. If the debtor is in chapter 11 bankruptcy and remain as the debtor-in-possession, the debtor must file both a Form 1040 and the Form 1041 for the bankruptcy estate (if the estate meets the return filing requirements).

If a husband and wife file a joint bankruptcy petition and their bankruptcy estates are jointly administered, their estates must be treated as two separate entities for tax purposes. Two separate tax returns must be filed (if they separately meet the filing requirements). "

Oh how I love laws that contradict each other.

Here is another article of interest: http://www.articlesbase.com/taxes-ar...nd-295293.html

Figure I would paste this because I've been researching a bit and thought I'd share during tax time.