If your accidental business closes, say in 2017, and your 2017 tax returns show a refund, ESPECIALLY because of business losses, you don't get to keep your entire tax refund. Even if you spent part of it on glamorous items such as car insurance. Or even if you spent a small fortune paying a forensic accountant a LOT of money to fix the prior year's tax return that your former CPA with onset dementia doesn't remember messing up beyond recognition. If that money came from your tax return, it doesn't matter. It wasn't yours to spend--even if you didn't know it.
If indeed you end up in this situation, it is best to make sure your attorney tells you upfront that your refund belongs to the bankruptcy court. If that doesn't happen (argh!) call the bankruptcy trustee and plead your case. You will still owe the money but at least the trustee won't sic a pack of dogs on you. Moral of the story: Honesty is the best policy
In our case, we have enough to cover this faux pas, but dang! It would have been nice to know this upfront!
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