2022 Increases in Filing and Exemption Limits for Bankruptcy Cases

The Bankruptcy Code is full of specific dollar limitations and allowances. These figures include dollar limits on eligibility for use of Chapter 13 and many other amounts, such as the value of exemptions permitted to bankruptcy debtors under 11 USC §522. All of these dollar amounts are adjusted by the amount of change in the Consumer Price Index for All Urban Consumers in the manner set out in 11 USC §104(a), a part of the bankruptcy code. The adjustment occurs every three years on April 1st and is based on the amount of change that has occurred over the previous three years ending December 31 the year before the adjustment. Dollar amounts are rounded to the nearest $25 and the adjustment applies to other limits set forth in the bankruptcy code.

The Judicial Conference of the United States has given notice of the changes going into effect for cases filed after March 31, 2022. Chapter 13 cases are now permitted for individuals with unsecured debts of no more than $465,275 and secured debts of no more than $1,395,875 in all cases filed April 1, 2022, and later. This is an increase of more than $25,000, about the same amount of increase announced in 2019 for unsecured debt.   Secured debt increased by $138,025 over the Chapter 13 limit previously imposed.

In states where federal exemptions are allowed, such as Oregon, the federal homestead exemption will be increased to $27,900 per person. The federal exemption for a car is now $4,450, probably an inadequate exemption in view of the supply related increases for vehicles occasioned by COVID-19 influenced supply shortages of computer chips.

Under the statute governing many federal bankruptcy dollar limitations, if the amount is indexed with an increase due to inflation, it must go up by at least $25.  While many states have opted out of federal exemptions and limit bankruptcy exemptions to those provided in state statute, many other dollar amounts apply to all cases filed in bankruptcy court.  Federal exemptions were allowed in Oregon as of July 1, 2013. These new dollar figures will only come into play for filings on or after the April 1, 2022 effective date, but they may allow more flexibility in Chapter 13 filings.

Relief from Tax Filing Deadline for Oregonians in Wildfire Areas

In a September 16, 2020 press release, the IRS offered Oregonians living in certain counties affected by the recent wildfires some breathing room from the upcoming October 15, 2020 deadline to file their returns. This relief assumes the taxpayer filed the automatic extension from the already extended July 15, 2020 deadline for this tax season due to the Covid-19 pandemic. The Oregon Department of Revenue has also released guidance stating Oregon has followed the IRS and extended the filing deadline for the required state returns.

Who benefits from this tax filing deadline relief? Oregonians living in or operating a business in Clackamas, Douglas, Jackson, Klamath, Lane, Linn, Lincoln, and Marion counties. The IRS and Oregon Department of Revenue will now allow additional time for those taxpayers from the listed counties to file their 2019 tax returns.

How much time? Until January 15, 2021. The recent guidance does not state anything needs to be filed or requested in advance for this filing extension. Nor do you need to have experienced a loss of your home or personal belongings to benefit from this extension in the listed counties.

What exactly is extended to January 15, 2021? Third quarter estimated tax payments that were due September 15, 2020; individual, corporate, and estate and trust income tax returns; partnership returns; S corporation returns; trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and, employment and certain excise tax returns that have an original or extended due date occurring on or after September 7, 2020 and before January 15, 2021 are now all due on or by January 15, 2021.

Not all filings are covered by these extensions. The information returns in the W-2, 1094, 1095, 1097, 1098, and 1099 series are still due. As are Form 1042-S, 3921, 3922, or 8027 and Employment and Excise tax deposits. Penalties on those deposits due on or after September 7 and before September 22, 2020 can be abated as long as the tax deposits were made by September 22, 2020, according to the September 16, 2020 IRS press release.

For those that have experienced losses, not just expenses for evacuation, have the option of claiming disaster related casualty losses on their federal income tax return for the year the loss occurred or in the prior year. Those taxpayers in the affected areas claiming the disaster loss on the 2019 or 2020 tax years should make sure to write “Oregon – Wildfires and Straight-line Winds” in bold letters across the top of Form 4684, Casualties and Thefts. A reference to the disaster declaration number for FEMA is also appropriate on these returns. The disaster number is FEMA 4562. See Publication 547 for details or schedule an appointment with Kent Anderson Law Office for assistance.

How to appeal a Notice of Deficiency from the Oregon Department of Revenue

Ignore a Notice of Deficiency at your own peril.

If your tax return is audited by the Oregon Department of Revenue, you will likely receive a Notice of Deficiency at the conclusion of the audit. The Notice of Deficiency summarizes changes that have been made to your tax return (or returns) and informs you of your options for appealing the Department’s decision. You have two options to request an administrative appeal of the Notice of Deficiency: you can submit a written protest or you can request an appeals conference. You must choose one or the other, and you must submit your appeal in writing within 30 days of the date on the notice.

A written protest should detail each of your objections to the audit changes, and may include additional documentation to support your arguments. When you submit a written protest, it will be considered by the same person who conducted the audit. In many ways, the written protest is like an extension of the audit. If you were not happy with the way the audit was handled, an appeals conference may be a better option.

An appeals conference is an informal meeting between you, the auditor, and a conference officer—a more senior Department of Revenue employee with substantial audit experience. The conference can be held in person or by phone, and you will have the opportunity to submit additional documentation to the conference officer. Although a conference gives you the opportunity to have a second opinion from an experienced Department of Revenue employee, you should take note—conference officers are not independent of the Department, which means that their decisions should not be considered objective or unbiased.

At the conclusion of the administrative appeal, or if no administrative appeal is made within 30 days of the date on the Notice of Deficiency, the Department will issue a Notice of Assessment. This notice is particularly important because it begins the 90-day period to appeal to the Oregon Tax Court. If you do not appeal within that time frame, the adjustments become final and your options for challenging the tax are very limited.

While considering whether to appeal to the Tax Court during the 90-day period following the Notice of Assessment, it is important to be aware of the Department’s collection activities during that time frame. Thirty days after the Notice of Assessment goes out, the Department will send a Notice and Demand to Pay. While this letter seems threatening, it is the next notice that you should watch out for. Thirty days after the Notice and Demand to Pay is sent (now 60 days after the Notice of Assessment) the Department will send a Distraint Warrant. This document authorizes the Department to garnish your wages or bank account, or potentially seize other assets, without further notice. It is important to understand that the Department could take these actions even before your appeal rights have expired.

If you receive a Notice of Deficiency or Notice of Assessment, or any other notice from the Department of Revenue, consult with an experienced tax attorney who understands the assessment and collection process and who will advocate on your behalf. If you do not take appropriate steps to respond to the Department’s notices, your assets are at risk. Be proactive, talk to a professional, and educate yourself about your rights as a taxpayer.