Central District Consumer Bankruptcy Attorney's Association

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Exactly the problem, Donny. Obviously its not necessarily the tax actually withheld. I never implied that it was. My question is on what basis does one calculate the necessary taxes for whatever period the courts (or the CDCBAA) decide is relevant? In reality, I can probably just stick a random number in the box that looks reasonable and enables my client to pass the means test and I doubt theres anyone at the OUST that to hang my hat on something a little more concrete (not that Id hang my hat on concrete.I think I just mixed metaphors)
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Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173 (818)509-1460 (fax)
Toll Free: 1-866-576-6275
web: http://www.bklaw.com/
This Firm is a Qualified Federal Debt Relief Agency (see what this means at
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The problem is how you determine the amount actually incurred (as opposed to withheld) during the six month period until the tax year closes and itliability for a six-month period they calculate it for a 12-month period. If you carve out a 6-month period to figure out what is actually incurred as opposed to withheld, it can result in absurd results.
For example: A debtor with no dependents makes $50,000 a year and files BK in July 2009. He is barely above median. His six months means test period begins January 01, 2009 to June 30, 2009. He incorrectly claims 99 federal exemptions and has zero taxes actually withheld. Without putting something in line 25, and assuming no other means test deductions, the debtor will fail the means test. You can have a tax accountant estimate what he will have to pay in taxes at the end of the taxable year based on 2 federal exemptions, and then divide that figure by 2, which comes out to roughly $1000 per month for the six month means test period. He now passes the means test.
But this assumes that he will be making roughly the same amount of money for the second part of the year as he did during the first part. I donhe debtors tax liability would be for any given 6-month period other than by assessing his year-end tax liability and dividing by two.
What then happens if the debtor loses his job immediately after filing for bankruptcy? Furthermore, what if he also starts his own business, makes zero profit, and has lots of losses and deductions before the years end. Now, Debtor will have zero income tax liability for the tax year 2009.
If you look at the six-month period in a vacuum, he actually incurred $1000 per month at the time he filed for bankruptcy based on an assumption. However, based on taxable events that happened outside of that 6-month window, it ends up he owes zero for the entire year, according to the agency that will tax him.
Therefore, if you calculate what he actually incurred during the six-month period at the time he filed for bankruptcy, -- at best, its based on an assumption that happens to prove correct and, at worst, the figure you entered in line 25 is way off from the reality of the situation.
Now, you can say that the taxes he owes during the first six months is offset by the refund he receives in the latter 6 months hence the year-end sum of zero. But how do you really break that down? I dont think our tax system is set up to calculate that kind of a figure with any degree of accuracy.
As I missing something here?
Thanks,
Donny

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Forms B22 ask for "total average that you actually incur"
I believe that this language indicates the debtor should set forth all tax incurred during the prior six months period, NOT the amount actually withheld. This captures the amounts not withheld due to over-stating exemptions and unpaid 1040ES & 540ES for self-employed debtors.

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This is also the exact same way I do mine. I believe future taxes are a
subject for Schedule I.
I think it would be a good idea if this issue were covered in the upcoming
means test seminar.
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Mark;
I think it really is in the word "necessary." If the Debtor has been under
withholding then he has been paying less taxes than necessary, and if he or
she starts withholding the proper sum that will pay their tax obligations
without over withholding, regardless of what occurred during the 6 month
period, then they are deducting a necessary expense. I usually assume the
withholdings perfectly represent their tax obligations, which is a practical
myopia. However, if I learn that they've claimed 8 allowances or whatever
number gives them cash now and a tax bill next year (they are debtors and
will borrow money from anyone, including the federal gov't) then I get it
figured out what they should be withholding.
As to the prospective part, I don't think that should fly, because they are
looking to assess the Debtor's income during that CMI period, and it should
be actual income during that period during actual tax obligation, whether
under or over withholding.
Schedule "I" does not restrict one to CMI, per the form.
However, that is my opinion, for whatever it is worth, and you asked for
case law. Sorry, I haven't done that yet. I seriously doubt that the
accounting morass these rules have conjured have been untangled in any
significant way.
Steve

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Do we have any court rulings or a consensus yet on what period is relevant
for determining the amount of "necessary taxes" that go in line 27 of Form
22A (or Line 30 of Form 22C)?
Is it the amount for the 6 months prior to filing, or the amount based on
the debtors' current/prospective income as of the date of filing? Or is it
whichever works best for the debtor in a given case?
I have many clients who have one set of numbers for the means test and
entirely different income on Schedule "I". Some have self-employment in
the 6 months prior to filing, then are employed on the date of filing; some
are the opposite; some a mixture of the two. I don't even know what to
have them ask their accountants.
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Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173 (818)509-1460 (fax)
Toll Free: 1-866-576-6275
web: http://www.bklaw.com/
This Firm is a Qualified Federal Debt Relief Agency (see what this means at

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