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Are Your Tax Withholdings Correct?

Posted on January 20, 2011 by Elizabeth Rosar Chermack

One common issue in a bankruptcy case is whether the person filing bankruptcy will be able to keep their tax refund (many times it’s a refund that they haven’t yet received). Depending on what assets you have and which exemptions you are using (Minnesota state exemptions or the Federal exemptions) you may be able to keep your entire refund. I know that a lot of people like to receive large tax refunds, because it is a forced savings plan. However, if you are regularly receiving large tax refunds, and you are also thinking that you might have to file bankruptcy, you might be providing the IRS with a nice interest-free loan to the detriment of your personal finances. If you don’t want to receive a large tax refund, you will need to change your withholdings. The IRS has a withholding calculator on its website. To see if you are withholding the right amount from your paychecks, start out by using the withholding calculator. It is also a good idea to double-check your results with an accountant or a CPA. If you change your withholdings so that you won’t get a tax refund, you won’t have to worry about exempting a large tax refund from the bankruptcy estate – and that means that you won’t have to worry about keeping your tax refund.

Posted in Bankruptcy Law | Tags: bankruptcy estate, exemptions, IRS, tax refund, withholding |
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© Elizabeth Rosar Chermack, Attorney at Law. Disclaimer: The content of this website is provided for informational purposes only. Information you obtain from this website is not, nor is it intended to be, legal advice. You should consult an attorney for individualized advice. Use of this website does not create an attorney-client relationship. Elizabeth Rosar Chermack, Attorney at Law, is a designated debt relief agency by an Act of Congress and the President of the United States. She assists consumers seeking relief under the U.S. Bankruptcy Code.