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CMI deductions
Thanks Mark. That's ultimately what I did. Have a note to myself to call and talk w/their accountant tomorrow, for the reasons you said.
Vicki L. Temkin Law Office of Vicki L. Temkin 15030 Ventura Blvd., Ste. 19-780 Sherman Oaks, Ca 91403www.vtemkinlaw.com
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Bad idea. The code requires the cmi to be determined based upon the
last full calendar 6 months of income. At the very least we need to
do the basic math of deducting the gross earnings of the last check
before the 6 month period from the last check at the end of the 6
month period. Your client's are signing documents under penalty of
perjury and we as attorneys ouirselves are at risk if we fail to take
basic steps to ensure the accuracy of the information of the documents
we file on the client's behalf.
For above median debtors we have to calculate the expenses too. My
current interpretation is that these are the expenses moving forward.
However, when it comes to payroll deductions this can sometimes be
chalenging. I perform the same calculation for all allowed payroll
deductions and use this as a projection moving forward, unless there
is evidence of materially different amounts moving forward, in which
case I calculate based upon that information. For instance a new job
with different withholding amounts or the prior year tax return
figures do not mesh with the withholding amounts. If the debtor is
receiving big refunds each year or owes a big sum then the payroll
deduction calculation may not be not accurate. Under those
circumstances the attorney may need to compare the withholding for
income taxes to what will actually be owed. The attorney may need to
consult with the debtor's tax accountant under those circumstance to
ascertain the more appropriate withholding amount. Frankly in order
to do our jobs right BAPCPA almost forces us to have a basic grasp of
income taxes so that we recognize when we need to have accounting
expertise help to protect our client's (and ourselves in the process).
A trustee cannot make a debtor stop contributing to a 401-k, but
they can and do maintain that the contribution is not a necessary
expense in Chapter 7 and are not to be included in determining pdi.
Presuming the debtor stops the contribution, under those circumstances
the debtor will have more tax to pay depending on the debtor's
marginal tax bracket and that average monthly amount can be added to
the tax expense. Again you may need to consult with the debtor's tax
accountant to calculate the additional tax. Every time I have faced
this issue with any trustee, I have prepared a declaration from a tax
accountant setting forth the calculation and the income assumption
upon which it was based along with of course the accountant's
credential information. This has always resolved any issues over
taxes for my cases.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
On Sat 9/10/10 5:28 PM , vicki temkin Vtemkin@yahoo.com sent:
CMI is the average of the immediate preceeding 6 mo. income, but
does that mean we have to add up all the deductions, mandatory and
voluntary, and take those averages too? That's what I've been doing
and I feel like an accountant, not a lawyer. The last few months of
the checks are the same, only a few from months of the earliest ones
are different. Can I just use the numbers from the last few or is
that a bad idea.
Can a trustee make the debtors stop contributing to their 401K to
have PDI? If the spouse stops contributing, as a US Trustee atty
seems to want her to do, her taxes withheld go up substantially, and
the same atty didn't like the number on the tax line either.
Vicki L. Temkin Law Office of Vicki L. Temkin 15030 Ventura
Blvd., Ste. 19-780 Sherman Oaks, Ca 91403 Ph: (818) 501-4658 /
Fx: (818) 501-0903
www.vtemkinlaw.com
Links:
[1] mailto:cdcbaa@yahoogroups.com?subjectCMI deductions
[2]
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In some cases you have to look at the actual expenses for each month in each
category. I have found that digging down into the details can make the
difference between passing or not passing the means test. I have two
clients come to me in recent weeks that were told by the intake paralegal at
one of the "firms" that they couldn't pass the means test. It appears that
some people just look at the last month's paystub and multiply it by six. In
both cases the monthly income fluctuated and a couple of low months made the
difference.
I have a variation on your deduction question. What if the client is under
withholding and her necessary expense are not enough to cover her actual tax
liability? Form B22A Line 25 asks for the "total average monthly expense
that you actually incur for all federal, state and local taxes, ." What
does "actually incur mean"? I found several cases that suggest the
calculation is problematic, and that "courts generally agree that the amount
a debtor has withheld from her paycheck is not necessarily the amount of
taxes "actually incurred." E.g., In re Lipford, 39,7 B.R. 320 (Bankr.
M.D.N.C. 2008)
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CMI is the average of the immediate preceeding 6 mo. income, but does that mean we have to add up all the deductions, mandatory and voluntary, and take those averages too? That's what I've been doing and I feel like an accountant, not a lawyer. The last few months of the checks are the same, only a few from months of the earliest ones are different. Can I just use the numbers from the last few or is that a bad idea.
Can a trustee make the debtors stop contributing to their 401K to have PDI?r to do, her taxes withheld go up substantially, and the same atty didn't like the number on the tax line either.
Vicki L. Temkin Law Office of Vicki L. Temkin 15030 Ventura Blvd., Ste. 19-780 Sherman Oaks, Ca 91403 Ph:(818) 501-4658 /Fx:(818) 501-0903
www.vtemkinlaw.com
CMI is the average of the immediate preceeding 6 mo. income, but does that mean we have to add up all the deductions, mandatory and voluntary, and take those averages too? That's what I've been doing and I feel like an accountant, not a lawyer. The last few months of the checks are the same, only a few from months of the earliest ones are different. Can I just use the numbers from the last few or is that a bad idea. Can a trustee make the debtors stop contributing to their 401K to have
PDI? If the spouse stops contributing, as a US Trustee atty seems to want her to do, her taxes withheld go up substantially, and the same atty didn't like the number on the tax line either. Vicki L. Temkin Law Office of Vicki L. Temkin 15030 Ventura Blvd., Ste. 19-780 Sherman Oaks, Ca 91403 Ph: (818) 501-4658 / Fx: (818) 501-0903www.vtemkinlaw.com
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