Chapter 7 Riverside Bankruptcy Trustee Karl Anderson. As noted in previous posts, Mr Anderson is a CPA as well as a Bankruptcy Trustee. Mr. Anderson reviews each of the tax returns provided by the debtors at the hearings.
One of the questions he asks to the debtors has to do with the dependents listed on the tax return. Trustee Anderson will ask “Have you given to the dependent more than half of the dependent’s support.”
This question comes up when the dependents listed in the petition are not direct family members. For example, when the tax return says the dependents are minor children of the debtor, then the Trustee does not ask the support question. However, when the tax return lists a nephew, niece, parent or other person, Trustee Anderson tends to ask “if the debtor has provided more than fifty percent of the dependent’s support?”
If the client then says he has given more than 50% of the support, the trustee will then ask the client to provide evidence of that support. This evidence can be cancelled checks or receipts or some other documents. The Trustee will then continue the hearing and ask that the evidence be sent to him to review.
Many times I have heard this question and the answer is the dependents are living in Mexico. The Debtor sends support to the people living out of the country and then uses those people as dependents on the tax returns. I am not a tax attorney, nor give advice on tax situations, but this scenario does come up enough on Mr. Anderson’s calendar that it is good to know about it ahead of time.
Always review the client’s taxes before sending the tax return to the trustee. One item to review is the dependents and who they are and what their relationship is to the debtor. Ask for explanations from your client and ask for back up evidence from your client as a Trustee or the US Trustee can always ask for more information on anything in the tax return or the bankruptcy petition.