Tax refund question

[katfzl]

Was hoping to file next week (paperwork is "done" although it seems i keep needing to redo things). Do I need to figure out what my 2010 tax return might be and exempt that?
We should be a no asset case as my husband was unemployed over a year until he recently found a job and I'm still unemployed.

[justbroke]

You should always exempt your "Anticipated Tax Refund" will be. Also, you may be required in your District, to calculate your average annual tax refund and include it as income on your 6-month lookback! Many United States Trustee (UST) office will do this "behind the scenes" for you, but it's better that you do it up-front. I don't know what the local rules will be like for your District in Texas, but again, many Districts require it be included, unless you are estimating your taxes based on your tax return, and not what's withheld on your paycheck (for federal "income" taxes).

[katfzl]

You should always exempt your "Anticipated Tax Refund" will be. Also, you may be required in your District, to calculate your average annual tax refund and include it as income on your 6-month lookback! Many United States Trustee (UST) office will do this "behind the scenes" for you, but it's better that you do it up-front. I don't know what the local rules will be like for your District in Texas, but again, many Districts require it be included, unless you are estimating your taxes based on your tax return, and not what's withheld on your paycheck (for federal "income" taxes).

To make it more complicated, we are filing in Arkansas and using federal exemptions. (We recently moved to Texas and can't file here yet).

[katfzl]

Do you just list it on the exemption sheet? Any particular federal exemption that would apply? We already let lost the house to foreclosure a month or so ago, so aren't taking the homestead exemption.

[Dougie011]

I think it would be hard to exempt something you don't have. I had my 341 meeting in August, and the trustee told everyone that when/if we got a tax refund, we HAD to contact him and see if he was going to take any of it or not. If your case is like mine, it would be up to the trustee how much he would get and if you get to keep it. The amount he can take, is prorated accordingly to when you filed bankruptcy. I am assuming that the longer a person waits in the year, the more the trustee could take. It was explained to me that the refund could be assets, and if it is large enough they could take some.

I am hoping mine is small enough that he won't want any of it.

[justbroke]

You can exempt the tax refund, because it's not a "future" event. While it is something not in your physical possession, tax "over withholdings" are no different than having that same money in a Savings account -- only it doesn't earn you any interest.

The only reason why your Bankruptcy Estate (via the Trustee) has rights to a portion of the refund, is because it has already been "collected" as overwithheld taxes. By "portion" I mean that the Estate only has rights to pro-rated percentage based on when you file. If you file in late June, the Estate only has rights to 50% of your refund should you have overwithholdings based on that tax year.

You do this on Schedule B (Personal Property) by listing the "Anticipated 2010 Tax Refund" and putting an amount. Then, on Schedule C (Exemptions), you exempt the "Anticipated 2010 Tax Refund" and list the section of law that allows you to do this. Since you're using Federal Exemptions, it will likely be 11 USC 522.

[Dougie011]

I wasn't sure if or how much I would get in a refund so I guess I screwed up and didn't exempt that. If I am under the median and the tax refund won't put me over, is it likely the trustee will let me keep it all? I figure I might get back $900 and I filed in August, so even if would take the whole thing, it wouldn't do anything for the creditor since since around $45,000 would have been discharged.

[justbroke]

I wasn't sure if or how much I would get in a refund so I guess I screwed up and didn't exempt that. If I am under the median and the tax refund won't put me over, is it likely the trustee will let me keep it all? I figure I might get back $900 and I filed in August, so even if would take the whole thing, it wouldn't do anything for the creditor since since around $45,000 would have been discharged.

Always exempt it if you can. It's not about whether the Trustee will "let" you keep it. It's about whether you claim an exemption on Schedule C for the anticipated refund, and that the section of law that you claim allows the exemption, actually does.

I say that the section of law allows it, because in some States, the wildcard (or unused homestead exemption) has limits on how much "cash" you can exempt. So you have to be sure that the exemption allows you to exempt cash up to the amount of your potential refund.