Getting a tax refund is something that we can look forward to. It’s nice knowing the government owes you money after you’ve paid your taxes, because we may need those extra dollars for perhaps several different reasons. However, there are some cases in which you can lose that tax refund to your creditors.

How is that possible? After all, it’s your money. However, you can lose your tax refund to a bankruptcy trustee if you have filed for bankruptcy.

Because you didn’t have enough money to pay your bills is really the only reason you would file for bankruptcy. If you do file for bankruptcy and are relieved of your obligation to pay your creditors back, there are certain rights you are no longer entitled to when it comes to your tax refund. The bankruptcy trustees may be able to take a fraction or sometimes all of your tax refund, but only under certain circumstances.

Filing Before January 1st if you file for bankruptcy before January first, the bankruptcy trustee can usually only take a portion of your tax return. Still, this sometimes only applies depending on certain circumstances, like which state you live in and other factors like that. Often though, say if you file for bankruptcy around September, that’s 3/4 of the previous year, so they can only take 3/4 of your tax refund. This is called a pro-rata portion of your income tax.

Filing After January 1st Filing for bankruptcy after January first will usually give the trustee the right to take all of your tax return. This usually only applies if you file bankruptcy between the beginning of the year and the time you receive your refund. If you get your refund and then file, the trustee may only be able to take part of your refund.

Filing Jointly If you are married, you may have filed a joint tax return with your spouse. If you filed for bankruptcy afterward, but only one of you filed, the other may still get their share of the tax return, because that spouse does not have to suffer the consequences of bankruptcy. Therefore if you filed for tax returns jointly and only one individual files for bankruptcy, you will still get half of your joint tax return.

Spending Your Tax Return Money If you spend the money you got from your tax return money before you file for bankruptcy, then the bankruptcy trustee will usually not demand it of you. However, what you spent that money on makes a difference in whether or not they will ask the money of you.

If you use your tax return money to pay soemone back, like any kind of creditor, including family and friends that you may have borrowed money from, then the bankruptcy trustee will ask that you pay the amount you received in your tax return. But if you do not spend it to repay someone and spend it on something like getting your roof fixed or repairing your car, they will usually not go after you to get that tax return money.

The following are the taxes charged b the PA State Taxes department-

1. Personal Income Tax

Pennsylvania is the only state in the United States of America to have a flat rate of tax of about 3.07% on individual income without any personal exemptions. Taxes are collected for municipal, county and school district. In spite of all this, the people of Pennsylvania, who thrive on a very modest income, qualify for the Tax Forgiveness Credit. April 15 or the next weekend is the last date for all the returns in the PA state.

2. Sales Tax

Sales taxes, too, are as high as 6% in Pennsylvania on taxable services and goods. One percent of sales tax is collected for taxable services and goods from the states of Allegheny and Philadelphia. Items like apparels, textbooks, drugs, raw food, residential heating fuels and sales for resale are the major ones exempted from sales taxes.

3. Personal and Real Property Taxes

Usually, the state of Pennsylvania does not impose taxes on personal properties or real estates. These kinds of taxes are meant for counties, school districts and municipalities normally. These districts impose taxes on personal property and real estate so it is better to know what school district or county you live in.

Municipalities are allowed to impose taxes on the real estates which do not cross 30 mills on the stipulated value of property and without the special allowance of the court. To know more about this you must visit the Pennsylvania Department of Education website.

Qualified seniors and disabled persons are eligible for the State Property Rent/Tax rebate program. The PA department of Revenue administers this while it is helped by Pennsylvania Lottery. Taxpayers are allowed to reimburse amounts up to a $650 a year. This is for the money they had earlier paid for rent or property taxes the previous year. The employers are expected to withhold this amount of money from the employees which they get from their municipal services and emergency imposed by the school districts and municipalities.

4. Estate Taxes and inheritance

Inheritance taxes are collected by the state of Pennsylvania. These taxes have an estate taxes based on decedent’s gross estate and confined to the credit of the state death taxes which is allowed on federal tax return. However, the Keystone state’s estate taxes are not imposed on this since federal credit for all these state estate taxes have been phased out completely.

5. Few more Facts on PA State Taxes

The facility of checking the status of all the refunds oh the PA state taxes in the website is provided to all the taxpayers. The department of Pennsylvania has a list of employers with stagnating tax accounts to collect heir respective state taxes which are yet to be paid. Anything earned outside the state of Pennsylvania is not taxable with respect to active full time military pay.

“In this world, nothing is certain but death and taxes”, wrote Benjamin Fanklin in 1789. If we taking care of our health and be safety conscious, we may be able to outwit death until we are very old. But for taxes, you can’t escape from paying tax since you start your first job, unless you are very poor. Hence, as a taxpayer, you need to have a good tax planning so that you can legally minimize your tax consequences and pay only what is due to Uncle Sam, not more!

Understanding Your Tax Bracket

The more money you make, the more you pay in taxes. Your tax brackets increase as your income increase. In additional, you loss some of you tax advantages, such as exemptions of dependents, that are phased out as your income increase.

Beside the federal government tax which is unable to be escaped for all taxpayers, if you live in state that also taxes you income, you need to pay for state government tax if applicable. There are seven tax-free states in United States: Alaska, Florida, Nevada, South Dakota, Washington and Wyoming. Hence, you should aware and plan in the additional tax rate if you are living at taxable state. For example if you are in the 25% tax bracket for federal taxes and you live in state that has a 5% income tax, you total tax rate should be 30%. Thus, for every $1,000 you earn, Uncle Sam has his share of $300 living you $700 to spend.

The dollar amount at which tax brackets occur change every year because of factoring in the inflation which vary from year to year. Hence, you should get the most current tax schedule and use it in your tax planning.

How To Legally Pay Less Tax?

There are many tax exemption and deductions benefits offer to taxpayers. You need to know the benefits that apply to you so that you can get some “discount” from Uncle Sam and pay less legally. The deductions and exemptions if you are eligible will help you to reduce your taxable income. Hence, you should get a good tax planning guide which will help you to understand what are the tax’s benefits apply to you.

While a tax deduction is something you subtract from your gross income to reduce your taxable income, tax credit is another tax benefits that you can utilize to minimize you payable tax. Tax credits are actually worth more to you than a deduction. It reduces the amount of taxes you owe, dollar for dollar. Thus, you better get to know the tax credits that can apply to you. Among the tax credits for you to calculate in, if applicable are:

1. Dependent & Childcare Credit

The dependent and childcare credit is available if you work outside your home or are full-time student. The expenses must be for dependents under age 13 or any person who is mentally incapable of care for themselves and they must be qualified as your dependent.

2. Child Tax Credit

If you enjoy this benefit if you have children being supported by if they are under age 17.

3. Education Credits

There are two types of education credits, the Hope Scholarship credit and Lifetime Learning credit. The Hope Scholarship credit is available for the first two years of college of you kids. The Lifetime Learning credit is not just for kids, you can utilize this benefit if you need to take courses to improve your job skills.

4. Adoption Credit

The adoption credit is based on the cost of adoption a child. These costs include reasonable adoption fees, court costs, attorney fees, and legal fees.

5. Earned-Income Credit

The earned-income credit is the only credit given as a payment. The credit is applicable for low-income families, usually with children.

In Summary

You can not escape from paying tax; this is the price of living in a civilized nation. But you can learn more in tax planning so that you can pay less, legally. Uncle Sam will let you living in peace if you just pay what is due to him and you no need to pay more to make him happy.