On our last post for Chapter 7 Riverside Trustee Steven Speier of September 23, 2013, we discussed the Means Test line #25 which talks about the amount of taxes withheld from a client that are “actually incurred”.
While the amount taken from a paycheck may represent a certain amount, part of those withholdings may come back to the client in the form of a tax refund.
On line 10 of the means test (Form 22A), it asks for all sources of income:
“Income from all other sources. Specify source and amount. If necessary, list additional sources on a separate page. Do not include alimony or separate maintenance payments paid by your spouse if Column B is completed, but include all other payments of alimony or separate maintenance. Do not include any benefits received under the Social Security Act or payments received as a victim of a war crime, crime against humanity, or as a victim of international or domestic terrorism.”
It would appear that this is where to list the tax refund, however the US Trustee Guidelines state not to include a tax refund in line 10:
Line 10, Income from all other sources.
. Includes net gambling, cash gifts, litigation proceeds, and trust income.
. Includes private disability income.
. Does not include SSA benefits.
. Does not include tax refunds.
. Does not include loan proceeds.
. Whether it meets IRS test for income could be relevant, but whether it is taxable income or non-taxable income is not a factor.
If your client receives a tax refund, it is not included in Line #10 of the means test. However the tax refund must be taken into account when figuring line #25 of the means test. So while the means test does not explicitly ask for the tax refund calculation, it must be dealt with on line #25. The tax refund, or potential tax refund should be dealt with on Schedule I or J of the petition, or the US Trustee may ask for the schedules to be amended.