schirallicpa Posted May 25, 2011 Report Share Posted May 25, 2011 Taxpayer has small sole proprietor business, files sch C. He also works as well as his wife. His pay is garnished for the Chpt 13 pymts. Most of the debt that put them in bankruptcy is NYS sales tax, and payroll tax withholdings. I have prepared the return and anticipate a refund. Since they are in compliance with the Trustee, will the refund get pulled by the IRS, or NYS? Should I file an innocent spouse form for the wife to get her portion of the refund? I've not dealt with any bankruptcy situations before. But I know NYS is dirty and am wary that they may take the refund. Any thoughts would be appreciated. Thanks~ Quote Link to comment Share on other sites More sharing options...
rfassett Posted May 25, 2011 Report Share Posted May 25, 2011 Was the Chapter 13 a joint filing? If so, innocent spouse will do nothing. If not joint, innocent spouse should be filed. I can not speak of NYS, but in my experience, as long as the bankruptcy payments are current, the IRS refund should not be captured. Check the plan documents though, because he may be required to turn any "windfalls" (tax refunds and the like) over to the trustee. Quote Link to comment Share on other sites More sharing options...
schirallicpa Posted May 25, 2011 Author Report Share Posted May 25, 2011 Was the Chapter 13 a joint filing? If so, innocent spouse will do nothing. If not joint, innocent spouse should be filed. I can not speak of NYS, but in my experience, as long as the bankruptcy payments are current, the IRS refund should not be captured. Check the plan documents though, because he may be required to turn any "windfalls" (tax refunds and the like) over to the trustee. Good point - thank you for your insight. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted May 25, 2011 Report Share Posted May 25, 2011 I have 2 clients under Chapter 13. The trustee must be given a copy of the return, and he will then send a release to the IRS before a refund will be granted. It is sort of "on hold" till the trustee releases all or part of it. Quote Link to comment Share on other sites More sharing options...
rfassett Posted May 25, 2011 Report Share Posted May 25, 2011 Well, this, like just about everything else in the bankruptcy world, must be different from district to district. I have a couple of clients in 13 currently and some in years gone by and they have yet to supply the trustee with a copy of a return while the bankruptcy was in the payout stage. Good to know about Ohio though. Thanks Jack. Quote Link to comment Share on other sites More sharing options...
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