Q: My Ch. 13 Bankruptcy calls for me to turn over my Tax Refund check to the trustee.
What happens if I receive a refund from the IRS but owe taxes on my state tax return (NYS)?
Will the trustee allow me to offset the two or will I have to turn over the Federal Refund and pay the NYS Taxes?
Will the trustee allow me to keep my Recovery Rebate Credit from my Economic Impact Payment .
Thank you very much.
A:
Whether or not you keep the federal refund depends upon three factors 1) the basis of the refund, 2) the amount of the refund and 3) how hungry your Trustee is. If the basis of the refund is child/earned income, then the exemption covers it all. There is also a Wildcard exemption of $1,350 that can be applied to any asset.
Otherwise, any refund over $1,000 is usually taken by the Trustee, but sometimes smaller amounts are taken because some Trustees will take almost any amount. Ch 7 Trustees get a flat fee for each case they administer and keep 25% of the first $5,000 or $10,000 of assets they find.
No, you cannot offset what you owe the state with the federal refund. Period.
I don't think the Recovery Rebate has any special exemptions, but however much is left in the Wildcard can be applied.
Timothy Denison agrees with this answer
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
