If you plan to receive a large tax refund early next year, you should act now to protect it!
Given your financial situation, there are culprits out there, lurking about, who will try and grab your tax refund before you even see it. There are several legal ways your tax refund can be snatched away from you, and you really need to know about them.
(1) Does this Issue Apply to You?
Before you get too worked up about this, you need to review your particular situation.
(a) First, Review Last Year’s Tax Returns.
You need to determine how much of your tax refund is from the Earned Income Credit. On IRS Form 1040, first look at line number 74. This is the amount of your tax refund. Next, look at line number 64, this is the amount of your refund that was from the Earned Income Credit.
(b) Consider What, if Anything, Will Change in this Year’s Tax Return.
Will you no longer receive any Earned Income Credit because you now have no dependent children? Were you unemployed? These types of changes can reduce your overall refund and your Earned Income Credit refund.
As a rule of thumb, if line 73 minus line 64 of your last year’s tax refund equals an amount in excess of $2,000 for a single person, or $4,000 for a married couple, then you probably have an issue. In addition, if you are close to the figure that applies to you and own a newer vehicle(s) without a car loan you probably have a problem.
If you determine that this could be an issue for you, please continue reading. If you are still not sure whether you have a problem, please call the Steffens Law Office. These matters can be tricky, and we have years of experience to help you resolve this issue and keep the tax refund for yourself.
If you plan to file bankruptcy, you should discuss these issues with our office before proceeding.
(2) If this Issue Applies to You, Follow these Steps to Protect Your Tax Refund.
(a) Deposit Your Refund in a Safe Place.
Probably the worst thing you could do is to simply have the tax refund deposited into your regular checking or savings account. Collection agencies could garnish the tax refund before you get a chance to spend it.
We recommend depositing the tax refund into a brand new, zero balance, prepaid debit card, like the ones sold at Wal-Mart or H&R Block.
Please continue reading to learn how you can spend the refund without getting into trouble.
(b) Spend down your refund before filing bankruptcy
(i) Pay Attorney Fees.
The best thing to spend your tax refund on is your attorney’s fees. The Bankruptcy Trustee will not object to your paying your bankruptcy fees with your tax refund. So there is no risk of your losing the value of this portion of your refund.
(ii) Pay for Necessary Goods or Services.
After your attorney’s fees are paid, spend your tax refund monies on necessary goods and services. Examples are major repairs to vehicles, such as tires or mechanical repairs, or perhaps a home repair. We also recommend buying a deep freeze, and a side of beef or pork to put in the freezer. Maybe you need some winter clothes or shoes. Do not, however, buy a mink coat or some other wasteful luxury item.
You can also spend your tax refund by prepaying for certain things, such as rent, vehicle insurance, health insurance, or home/renters insurance.
Please contact the attorneys at the Steffens Law Office for further information on how to spend your tax refund, and how much of your tax refund you need to spend before filing bankruptcy. We have over 30 years combined experience in the field of debtor/creditor law, and we want you to get the benefit of your tax refund, not a collection agency or the bankruptcy trustee.
Dedicated to helping you achieve a fresh financial start.