Married couple filing taxes separately when one spouse is in Chapter 13 bankruptcy.
I am currently going through a Chapter 13 bankruptcy. My spouse is not. Should I file our taxes separately instead of jointly since I must report to the trustee any tax refund. I want my spouse's refund to be protected even if mine can be garnished. I am in North Carolina. Thanks.
Quick Answer:
Given your Chapter 13 bankruptcy and your goal to protect your spouse's refund, filing separately could be a strategic consideration.
When you file separately, each spouse reports their own income, deductions, and credits. This clearly segregates any refund due to your spouse, potentially making it easier to protect their portion from your bankruptcy trustee. If you file jointly, the entire refund might be considered property of your bankruptcy estate, even if a portion is attributable to your spouse, though some courts allow for allocation.
However, filing separately often results in a higher combined tax liability for the couple compared to filing jointly. This decision involves balancing the protection of your spouse's refund with the potential for a larger overall tax payment. It's crucial to evaluate both scenarios to understand the financial impact on your household.
Note: This answer is provided for convenience only. It is important that you speak to a CPA about your individual tax situation.
