Filing Taxes Under Chapter 13

Part of our Bankruptcy Tuesday series

     The bankruptcy topic this month is tax returns. This week, we’re going to talk specifically about Chapter 13 debtors. In Chapter 13, in addition to supplying the Chapter 13 trustee with tax returns for the two most recent tax years prior to filing, a debtor is going to have to give the trustee copies of tax returns for all years in which the debtor is making payments to the Chapter 13 trustee. This is significant for at least three reasons. First, the Chapter 13 plan requires the debtor to pay to the Chapter 13 trustee any tax refund in excess of $1500 per year, or $3000 between joint filers (not including a tax refund on account of the earned income credit). For plans filed prior to December 1, 2017, those amounts were $1200 and $2400. Supplying the Chapter 13 trustee with a copy of your tax return will alert the Chapter 13 trustee how much you’re going to have to pay him from your refund. Paying the Chapter 13 trustee a portion of your tax return does not typically reduce the payments you otherwise have to make to the Chapter 13 trustee. Secondly, the amount that a debtor has to pay in a Chapter 13 plan is often dependent on a debtor’s income. If a debtor receives a significant raise, either as a result of a job change or promotion, providing a copy of the tax return is going to inform the Chapter 13 trustee of that raise. That may require an increase in plan payments. Finally, filing your tax returns and providing a copy to the Chapter 13 trustee is an administrative burden placed on Chapter 13 debtors. You are not permitted to ask a taxing authority for a filing extension. It is required to file your tax return when it is due, normally April 15.


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