Tax season is upon us. If you are considering filing bankruptcy, it is important to know how it may affect your tax refund. Why? Because when you file bankruptcy, the court is entitled to take a portion of your next year’s tax refund. In other words, if you file bankruptcy in 2017 the court may take a portion of your 2018 refund.
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How much of your refund will you lose? It depends on when you file. The court uses the date you filed to determine how much of the year had passed. It then takes a prorated share of your refund. For example, if you file in March, the court can take 3/12 of your tax refund. If you file in November, the court takes 11/12 of your refund. As you can see, the later in the year you file, the more of your refund you may lose.
With a little planning, you can limit the amount you lose. Timing is key. Filing earlier, rather than later, is one way to help minimize your loss. Conversely, if you are at the end of the calendar year, perhaps it would be better to wait to file. In either case, it is important to consider the timing of your bankruptcy to minimize its impact on your returns. Another strategy is to revisit your tax withholding. Are you over withholding? If so, you may be unintentionally creating a larger refund which can be taken by the court. Adjusting your withholding can mitigate this problem. Have your attorney review your withholding to ensure you are not going to lose more than necessary.
The bankruptcy process is not difficult, but there are a lot of rules. Knowing the rules and having a strategy is key to having the best possible results.
Are you considering filing bankruptcy? Contact Atlas Law, PLC to learn more! Experienced attorneys can help guide you through the bankruptcy process. Our Plymouth Lawyer serves Detroit, Ann Arbor, and South Eastern Michigan including Plymouth, Livonia, Northville, Novi, Canton, and Farmington Hills. Contact us today!
We offer free consultations. Call now (248) 773-5555