For Chapter 13 filers-Do they take your income tax check every year?

[Anonymous]

Thanks

MB

[TigerCat]

They never took mine. And I even had some old federal taxes (> 3 years) included in the bk.

[Anonymous]

In our Ch 13 BK, we were allowed to keep the first $1,000 in state and federal refunds.  The rest was turned into the trustee.

I think that's a fairly recent ruling.

It also seems fairly decent - it allows you to keep an emergency fund, which would otherwise be very difficult given the tight budget you work with while in a Ch 13.  And it puts the rest of the money where it belongs - with the creditors.

I'm guessing some people could really play the system otherwise.

[TigerCat]

My refunds were always less than that $1,000 threshold you mentioned beamMEup, so that's probably why it was never an issue for me.

[Anonymous]

I wasn't required to forfeit any refund -- but, that may be because, for years, I've taken great pains to avoid getting a refund. I'm sure my record-keeping indicated that to the bankruptcy court. A tax refund is the proceeds from your interest-free loan to the federal treasury! By law, we are allowed to adjust our withholding so that at least 90% of anticipated tax liability is withheld. You may claim as many exemptions as is necessary to meet that standard. Thus, I take my 'refund' every payday in my paycheck, and send a less-than-10% balance to the treasury out of it each April 15. (Actually, because of unusual, one-time credits passed by Congress, I've gotten back small refunds the last two, post-BK years. Otherwise, I'd have written a check for less than $100 this year. My goal to write the IRS a check that will cost them more to process than it is written for!)

[Anonymous]

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@Anonymous wrote:
I wasn't required to forfeit any refund -- but, that may be because, for years, I've taken great pains to avoid getting a refund.

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The IRS also has a great calculator on their website.  We used it this year because our accountant made a dang big error last year and we ended up owing over three grand to the IRS (and we paid that guy ).  The IRS calculator is quite specific and requires a little time and some accurate input, but i think it's grand.  Both DH and I have changed our W-4's this year based on its feeback.  Very helpful.