Would my income tax return be considered a windfall in Chapter 7?
March 9th, 2010 | Author:
Brooke S asked:
Hello,
I had my 341 (Meeting of the Creditors) on November 24. My case has not been discharged yet. If I go ahead and file my taxes, and I am due a refund – do I have to let the Trustee know? Can I keep the refund? Should I wait?? So confused and my attorney stinks!
Thanks
(and I live in Texas)
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Unfortunately you will have to go back to your bankruptcy attorney (even if he or she “stinks”) to ask this question.
The income tax refund is not considered a windfall, but in many districts the court does require that the income tax refund be turned over to the trustee. In other districts, though, attorneys have successfully argued that this should not be required. In yet other districts and individual cases, attorneys have successfully been able to exempt tax refunds so that even if it is considered “income” the debtor still doesn’t have to turn it over to the trustee.
So basically, you need to ask your attorney whether in your specific case you are required to turn it over to the trustee.
Also – just a little technicality – IF indeed your tax refund is considered to be “income” that must go to the trustee it doesn’t matter when you file your tax return; it is considered to be yours as of January 1st (no matter when the return is filed) just as your taxes are considered “due” on January 1st even though they aren’t “payable” until April 15.
Sorry, I know this isn’t the answer you probably wanted to hear.