Do You Get To Keep Your Tax Refunds?
The answer depends. It is best that you ask an experienced bankruptcy attorney this question. Below is some general information on how to maximize your take-home pay and reduce any amount of your tax refund you may be required to turn over to the bankruptcy trustee. Many clients live paycheck-to-paycheck and find themselves running out of money for necessities and the end of each month. Some clients also receive large tax refunds each year because they are over-withholding from their paychecks. This problem can be compounded if your trustee requests you turn over all or a portion of your tax refunds. Most courts allow you to keep your earned income credit. Some courts allow you to keep child tax credit. Many courts require that you turn over the tax refunds created by your over-withholding. Continue reading to learn how to adjust your withholdings so that you can increase your take-home pay and reduce that portion of your tax refunds created by over-withholding.
General Strategy For Filling Out A W-4 Form
Due to the changes that were made in the tax laws in 2019 and the changes that were made to the W-4 withholding form in 2020 many people now over withhold on their federal taxes. This causes and individuals take home pay to be less than it should be and results in an increased tax refund. This problem can be further compounded if your Trustee requests you turn over a portion of your tax refund. Filling out a new W-4 form can result in increased take home paychecks while reducing your tax refund. It is recommended that you complete and submit to your employer an updated W-4 form so that your employer can withhold the correct federal income tax pay.
- IF YOU OWED TAXES LAST YEAR– If too little is withheld, you will generally owe tax when you file your tax return and may owe a penalty. Use Form W-4 to increase your withholding. That’ll help you owe less (or nothing) next year.
- IF YOU GOT A REFUND LAST YEAR– Use Form W-F to decrease your withholding. If too much is withheld, you will generally be due a refund but you may be giving the government a free loan, and could be needlessly living on less of your paycheck all year. Use Form W-4 to reduce your withholding.
IRS Tax Withholding Estimator
The IRS tax withholding estimator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck.
If you have additional questions about your withholding, consult your employer or tax advisor.