PHILIP S. ABROMOWITZ, ATTORNEY AT LAW
5920 E. PIMA ROAD, SUITE 150
TUCSON, ARIZONA 85712
PHONE: 318-3200 or outside Tucson 1-800-615-6688
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Bankruptcy Attorney Lawyer
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WHAT ABOUT INCOME TAX REFUNDS?
If you may get an income tax refund, you should understand how bankruptcy could affect it. If you are not getting an income tax refund, or it is less than about $500 combined State and Federal, you have nothing to worry about. The Trustee in bankruptcy is almost never interested in taking in less than $500 in refunds. However, if you think you might get a combined State and Federal refund totaling more than $500, you should discuss that with Mr. Abromowitz.
Typically, the Trustees in bankruptcy are only concerned with refunds for cases filed between September and April. The reason for the interest is that many people who need bankruptcy protection and cannot pay their bills, will still sometimes get a good size refund. That is because they had a considerable amount of income tax withheld. If the refunds will come in while the case is being processed, the Trustee will want that money. It only happens one time. For most of my clients, losing a refund is not a big deal compared to the relief that they’re getting from their burdensome debts through bankruptcy. However, there are a number of things that you can do to protect your refund.
On thing many people do is delay filing their bankruptcy until after they received the refund. Obviously, the timing has to be right. Sometimes delaying for the sake of getting a refund is foolish, when creditors are driving you crazy and the refund is not very big. Another legitimate approach is to simply adjust your withholding with your employer. For example, let’s say that last year you received a $2,000 income tax refund. Assuming your income this year to be approximately the same, if you have less withholding taken out (and take home more in your paycheck), then at the end of the year the amount of withholding held for taxes may not be much more than the taxes you owe. You will get a much smaller refund, which you’ll be able to keep.
Don’t worry if this is a little confusing. You can always discuss it with Mr. Abromowitz, or one of the staff.