Trustee Blog

Three Things to Remember about Sending Taxes to Bankruptcy Trustees

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Riverside Bankruptcy Chapter 7 Trustee Karl Anderson and tax returns. As mentioned before, Trustee Anderson is a CPA and has an affinity for Debtors’ tax returns. As we approach tax season, it is good to remember three things about your client’s tax returns as you submit them to the trustee prior to the meeting of creditors.

1. Review the entire tax return prior to sending it to the trustee.

Your job as the debtor’s attorney is to play by the rules and submit everything to the court and to the trustee in a timely fashion. As we discussed last time (January 24, 2014) the debtor must submit the tax return to the Chapter 7 Trustee at least eight days before the meeting of creditors. The trustee wants the full tax return and not just the first two pages.

As you photocopy the tax return or prepare to upload it to the trustee if he wants it delivered by secured means, take the time to fully review each page of the tax return.

The other day I was appearing for an attorney and the Chapter 7 Trustee asked the client about a house that was listed in the tax return. The house was not listed in the petition, but there was a house that was listed in the tax return. Now the debtor and the trustee both had a problem as the debtor had to explain that the house was not his, and the trustee had to find out who owned the house.

It turns out that the tax preparer had not deleted the house from the program when he prepared the tax return for the client.The house belonged to another person that the tax preparer had done a tax return for.

The client signed the taxes without reviewing the taxes and submitted it to the government. The attorney did not review the taxes and sent them to the trustee. Had the bankruptcy attorney reviewed the taxes, he and the debtor could have caught the mistake. As it stands now the debtor and the attorney have to extra work to prove that the house is not the clients.

2. Send the full Federal tax return.

As mentioned above, send the full tax return. Page two of most tax returns refers to several tax schedules. If those tax schedules are not included in what is sent to the trustee, then the meeting of creditors will be continued until the trustee review the full tax return with schedules included.

 3. The tax refund is part of the bankruptcy estate and must be protected.

Check the client’s tax return for the amount of the tax refund the debtor will receive. This money that is due to the debtor is like cash and must be exempted. If the tax refund is not protected, then the Chapter 7 Trustee is entitled to the tax refund to pay off the creditors of the bankruptcy estate.


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