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California ch7 tax refund ?


jims86lxihb
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I have a attorney partially retained. But I cannot get my calls returned and I really want this issue bedded.

First off, I did search, problem is, that search netted different answers.

I plan on filling a chapter 7 case soon.

I will be using the system 2 wildcard examption to protect some home equity and 2 cars that I own. This uses 100% of the $22075 wild card

1. If I file the ch7 case Nov 1st, will I have to surrender 11/12's of my 2010 tax refund when I receive it in April/May of 2011?

2. Will the portion of the refund that is generated from "earned income credit" be exampt?

If the answeres to one and two are not in my favor, at what point would I have to wait to file the ch7 to be able to keep my 2010 refund? It matters a great deal because I need the refund the get current on my 2010 and 2011 property taxes.

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  • 4 weeks later...

Your tax refund for April next year would not have to be turned over to the bankruptcy estate if you filed this month or in December and filed your tax return in April.

Three main reasons:

First, it is unlikely your BK7 case will drag on into the April time frame. As such you can probably expect a discharge well ahead of getting any refund on your taxes. What refund you think you may get is nothing but a guess right now... you don't even have your 1099s yet.

Second, since Congress has let the tax issue slip (again) the entire nation doesn't know for certain what our tax liabilities will be into next year. As such it would be entirely unreasonable to even guess as to what refund, if any, you may actually get. No trustee could force that issue as it is an act of Congress holding it up.

Third, you have the choice of applying your refund toward next year's liabilities. I'd like to see a trustee get the IRS to hand over those funds if you choose to use it that way. Very unlikely.

So if you think you will be getting a refund next year, it's probably not a big deal if you are filing bk7 now.

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Agree with above, but with one caveat- Your 2010 tax return (filed by April 15th, 2011) reflects the 2010 tax year only, which the law is already determined. The looming tax uncertainty has to do with all income and gains booked in on or after January 1st, 2011. The main issue right now is that federal tax & FICA withholding requirements will ratchet up automatically, so all things being equal, if nothing is done take-home pay starting January 1st will be reduced. For some, it will be significant and come as a real shock.

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reflects the 2010 tax year only, which the law is already determined.

Well not quite. My uncle at the IRS said they haven't finalized the forms yet due to a few laws that congress still has a chance to make retroactive to the beginning of 2010. Most will not have anything to do with the average Joe, but a few such as some of the home energy savings credits and the final way they will figure withholding (remember that weird reduction of withholding that happened half way through 2010) are still not final.

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Your tax refund for April next year would not have to be turned over to the bankruptcy estate if you filed this month or in December and filed your tax return in April.

Three main reasons:

First, it is unlikely your BK7 case will drag on into the April time frame. As such you can probably expect a discharge well ahead of getting any refund on your taxes. What refund you think you may get is nothing but a guess right now... you don't even have your 1099s yet.

Second, since Congress has let the tax issue slip (again) the entire nation doesn't know for certain what our tax liabilities will be into next year. As such it would be entirely unreasonable to even guess as to what refund, if any, you may actually get. No trustee could force that issue as it is an act of Congress holding it up.

Third, you have the choice of applying your refund toward next year's liabilities. I'd like to see a trustee get the IRS to hand over those funds if you choose to use it that way. Very unlikely.

So if you think you will be getting a refund next year, it's probably not a big deal if you are filing bk7 now.

Trustee's are in the business of finding assets and my past tax returns will reveal a history of generating refunds. At the 341 meeting the trustee will have me sign a stipulation to turn over any forthcoming tax refund. I simply cannot allow that to happen. I will wait until I receive the refund and have spent the funds carefully on bills that will pass muster with the BK court and trustee. And then fill my ch7 case.

For me it doesn't matter what congress does, I will have a refund coming.

www bkforum com/showthread.php?62848-Reminder-October-is-When-Trustees-Look-for-Tax-Refunds

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