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  1. #1
    Join Date
    Apr 2009
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    Somewhere near Canada
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    35,894

    Default IRS Taking Tax Refund Which Was Exempt

    I owed back taxes from 1999 and the debt was included in my no asset Ch 7 filing; I filed my 2008 return after I filed the Ch 7 and it indicated a refund was due for overpaid 2008 taxes; the anticipated amount was listed as an exemption in the bankruptcy.

    I went online earlier to check the status - I wasn't sure whether the refund would be released to the trustee - and then had to call IRS and was informed that the refund had been applied to the 1999 debt, even though they are aware of the Ch 7 filing.

    Having spent the past two hours on the phone (to various departments), I still don't have an answer - are they somehow exempt from the automatic stay? As far as I'm aware there is no lien on any property (largely because I don't own any property) but IRS has taken every tax refund since 2002 to satisfy the 1999 dept. There is still an outstanding amount on the 1999 debt (thus trying to discharge same in the Ch 7).

    Would appreciate any help, as I'm driving Google and myself completely insane trying to find out whether or not they had the right to apply this year's refund (which again is listed as a exemption) to the 1999 debt even after filing Ch. 7

    I'm pro se and haven't yet had the 314 meeting, and I'm reading conflicting information....some saying IRS *can* take even an exempt refund amount to pay off past tax debt if there is a lien, and some saying that they cannot take the refund if a) the original tax debt is listed in the Ch 7 and b) the anticipated amount was listed as exempt.

  2. #2
    Join Date
    Sep 2005
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    Posts
    98,846

    Default Re: IRS Taking Tax Refund Which Was Exempt

    Did you raise the issue with the trustee?

    This guide (PDF) outlines the position of the IRS on bankruptcy laws, and when the bankrupt estate has jurisdiction over tax refunds (page 22).

  3. #3
    Join Date
    Apr 2009
    Location
    Somewhere near Canada
    Posts
    35,894

    Default Re: IRS Taking Tax Refund Which Was Exempt

    Thanks so much for your response.

    I wasn't aware I could actually ask the Trustee about this; I was under the impression that you can't ask the Trustee specifics etc?

    I'm still not entirely sure why IRS could do this - I (probably mistakenly) thought that while the could hold the refund amount until/unless a waiver/relief was granted, or until a decision was made by the Trustee?

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