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Bankruptcy and Tax Returns

Because of my bankruptcy, I have to send in any tax refund owed to me. I am thinking ahead to the next year and wondered if it is legal to go tax exempt this year so I won't have a refund to forfeit? Anyone been through this before?

Answer Question

Asked by Anonymous at 7:05 PM on Feb. 23, 2009 in Money & Work

Answers (4)
  • What do you mean? You can't just go tax exempt. That makes no sense. Non-profit agencies are tax exempt. Individuals can't be. I think you're really, really confused.

    Answer by Anonymous at 8:21 PM on Feb. 23, 2009

  • If anything I would up your number of dependents so you don't get much taken out of your check for taxes and then pay in at the end of the year.

    Answer by kabbot01 at 9:28 PM on Feb. 23, 2009

  • You could re-do your W-4 but remember what you are agreeing to: that you believe you have NO tax liability, (which means that your employer would not be required to withhold) and unless you could prove that you have no tax liability for what ever reason, to the IRS via your last few years or even last years tax return that you filed, then you would put yourself at risk to being penalized even more.

    Not a smart choice. People are doing it, but it red flags the IRS.

    Answer by lifeasinoit at 8:38 AM on Feb. 24, 2009

  • And while you can do that what difference would it make? You would then have to pay any owed taxes at tax time and STILL pay off your bankruptcy debts. If you filled chapter 13 and not chapter 7 there is NO way of getting out of paying what you owe. So, it's your choice, keep the taxes withheld the same and have it go towards what you are legally obligated to pay off when you get your refund....OR....try to cheat the system by not paying taxes throughout the year only to find yourself OWING at tax time on top of the bankruptcy debts???? It's safer and smarter to stick with paying your taxes and handing it over.

    Answer by Mom2Jack04 at 10:41 AM on Feb. 24, 2009

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