Local Rule 6070-1: Tax Refunds

Rule 6070-1 Tax Refunds

(A) Setoff. The Internal Revenue Service must serve notice of a setoff authorized under 11 U.S.C. § 362(b)(26) to the debtor, the debtor's attorney, and the appropriate trustee within 40 days after the setoff.

(B) Cases under Chapter 7. The Internal Revenue Service is authorized to make income tax refunds for tax years ending prepetition or for tax years ending postpetition in which part of the refund accrued prepetition, in the amount of $2,000 or less, directly to the debtor. This does not bar the chapter 7 trustee from seeking to collect refunds from the debtor. Tax refunds exceeding $2,000 must be paid to the trustee only if the trustee has notified the Internal Revenue Service in the manner specified in LBR 2002-2 of the request before the refund is paid. A refund for any tax year accruing and ending entirely postpetition may be paid to the debtor.

A notice to the Internal Revenue Service by the trustee may be sent only in those cases in which the trustee has a reasonable and justifiable belief that a refund exceeding $2,000 is due the debtor. In all cases in which a notice is provided by the trustee, the trustee must also specifically notify the Internal Revenue Service of the filing of the trustee's final report.

(C) Cases under Chapter 13. Any setoff taken in a case with a confirmed chapter 13 plan is subject to the standing trustee's percentage fee, to be paid from plan payments, if the tax claim was included in the plan.