Many people look forward to their tax return every year as an opportunity to pay off a little debt or make some necessary purchases. But what happens to your tax refund if you file for bankruptcy? While it is possible that a bankruptcy trustee will require you to hand over your tax return, chapter 7 bankruptcy allows most people to claim their refund. This is not the case for chapter 13 filings, which often require a surrender of one’s yearly tax refund as part of the standard repayment terms. If you’re thinking about filing for bankruptcy, here are five things you can do to avoid losing your yearly tax return.
1. Know your jurisdiction
The requirement for chapter 13 filers to hand over their tax return varies from place to place. In some locations, handing over your tax refund is non-routine. A local bankruptcy attorney can help you understand the tax return requirements of chapter 13 filings in your area.
2. Keep your trustee informed
If you receive a larger return than you claimed during filing, it is possible that the nonexempt amount could be forfeited. By keeping your bankruptcy trustee fully aware of your tax return situation, you can often claim the extra amount exempt by amending your payment schedule.
3. File your taxes
To increase your chances of keeping the entire tax return be sure to file, prepare and file your taxes promptly. Your bankruptcy trustee will include your dutiful tax filing as part of the bankruptcy process.
4. Be sure to claim exemption
A bankruptcy trustee can request that the IRS or FTB turn over your tax refund directly to them. For chapter 7 bankruptcy cases, make sure to include a tax refund exemption in your filing.
5. Keep in mind that tax refunds are an asset
When filing a bankruptcy case, anticipated tax returns must be listed on Schedule B and claimed exempt on Schedule C. If you fail to list anticipated tax refunds, they are susceptible to be being claimed by your bankruptcy trustee. A bankruptcy attorney specializes in helping you prepare your filing accurately and completely.
For more information on tax refunds or for a cheap bankruptcy attorney in Las Vegas, contact DeLuca and Associates today.