Posted on 01/21/2014 7:30:26 AM PST by Kaslin
Dear Dave,
My husband has his own business installing windows. As a result, we now have IRS and state tax debt. We’re managing the payments, but where should these debts be placed in the debt snowball plan?
Olivia
Dear Olivia,
I don’t usually cheat on the smallest to largest progression of the debt snowball, but I’d recommend moving these debts to the top of the list.
Both state and federal taxes come with ridiculous penalties and interest rates, and the authorities at either level have virtually unlimited power at their disposal to screw with your life if something bad happens. The IRS can actually take your money without suing you. So, you don’t want to become a blip on their radar screen by being late with payments.
Get it cleaned up as quickly as possible, Olivia. You don’t want to mess around with these guys!
—Dave
Dear Dave,
My husband died eight years ago, and I never closed his bank accounts that were opened when we lived in another state. We lived in Florida before moving to Oregon. I didn’t probate the estate, and he did not have a will. I’m trying to work with the banks to get this settled, but they’re giving me the runaround. Do you have any advice?
Melinda
Dear Melinda,
The first thing you need to do is contact an attorney who handles estate planning. If the accounts were opened in Florida, but you both lived in Oregon at the time of his death, technically the estate would be probated in Oregon. That may be what has to happen. If so, a judge would appoint you as executor. As executor, you can close the accounts and disperse any money to the rightful heir—which is you.
Be prepared, though. It may take somewhere between $250 and $500 in attorney fees and court costs to make this happen. If you’re lucky, you might get a simple motion from the court that would cost you next to nothing. But find a good estate planning attorney who knows Oregon law inside and out. Estate laws and probate laws differ from state to state, and Florida and Oregon both have some weird laws in these areas.
This probably seems like a lot of trouble, but you have to remember the banks are simply trying to protect themselves and follow the law. Anyone could walk in with a death certificate (they’re public record), and claim to be an heir. So, they have to have a court document in order to avoid any potential liability.
I’m sorry for your loss, Melinda. I know it still hurts after all this time, but you need to address this as soon as possible. I’m sure it’s what your husband would have wanted.
—Dave
Doubtful that the window installation industry gets special attention from the IRS. The more correct statement is likely “my husband started his own business without first understanding that he was going into a silent partnership with the taxman and failed to realize what it took to satisfy that partnership.”
Is there something wrong with that?
If you are a handyman offer your non commercial customers two prices one cash price that is 20% less than the credit card / check price which is traceable/reportable. If they 1099 your ass well, who does that?
The MORE correct statement is likely “my husband started his own business and the State/Fed gov’t stands at the beginning of the pay-out line before he receives penny one...”
Say, can anyone tell me exactly when slavery ENDED? At 40%+, I don’t think gov’t got the memo.
LoL. I think the hang up is over the phrase AS A RESULT right after she says her husband has a window business. I know she’s just trying to keep her question pithy, but it does sound funny.
I don’t see anything wrong with that. It just seemed like she implied that tax debt was a natural result of her husband’s business as if nothing else occurred such as poor planning, catastrophic events, illness, etc.
I don’t understand why people listen to this guy. First of all, he comes across like a jerk. Unlikable.
But all he’s telling you is what you already know. “Pay off your debts, make more money, don’t spend money you don’t have. There is no shortcut.” Thanks a lot Sherlock. And this guy is a millionaire for saying this?
The problem is the onerous tax laws not the enforcement (presuming for now that it is just and equitable.)
The more people who are able to skirt tax laws and earn/pay under the table the more people we have moving from the ‘taxes should be minimal and less intrusive’ column and into the ‘taxes only affect rich people so raise taxes so I get my free crap’ column.
Can’t disagree with that perspective, perhaps I was too generous in the “silent partner” label.
Any debt to the IRS can be handled by an agreement to pay. Interest is high but it does give you time to pay off the note. If there is a significant differential between what they want and what you think you owe, hire a tax rep that specializes in this issue.
Its irrelevant to the question at hand. She isn’t asking about the cause of the tax debt, simply stating she has tax related debt and wanted to know where to put them in order in the “debt snowball”.
Ramsey teaches line up your debts and pay them off smallest to largest, taking the payments from the smaller debts as they are paid off and apply them to the next larger and so forth. If you have more debts than you can pay with your income those that don’t get paid wait.... You snowball your payments and work through your overall debts in this manner quickly.
This question was just whether the snowball order should apply to taxes or are they an exception.. Dave is telling her, they are an exception, always pay them, don’t NOT pay them to pay off other debts... treat them as a special case.
How the tax debt came to be is really irrelevant to the question at hand.
I never found him unlikable when I have heard him, I think for the media he is working in which is radio, he does about as good of a job as you could do when dealing with such a dry and boring topic... Lets face it folks can drone on for an hour about how they got into a financial mess, and your show would be tuned out and off the air almost instantly... cutting to the chase is almost always what you need to have a caller do if this is your schtick and you want to have folks keep listening.
As to telling folks what they already know... You’d be surprised how many folks don’t know the fundamental basics of economics... It blows my mind to this day that you can get a high school diploma without any time spend on economics 101.
Don’t believe I indicated enforcement was the problem, though, IMHO, those two points go hand-in-hand.
Now, as to your ‘skirting’ problem....There wouldn’t BE that problem IF/when gov’t didn’t actively subvert the ‘Equal enforcement’ by allowing/codifying the abuse (IE: ‘Earned Income’....REALLY?!, tax breaks for XYZ, etc.). Least alone those with ‘$0 income’ that still benefit w/out ‘paying’.
I believe we can ALL agree the income tax is the WORST way to pay for services (I’m a big sales tax...ala Fair Tax [it has its warts that need tweaking, that’s for sure]). And, again IMHO, services should be paid per household AND for those of use (IE: All ‘need’ police/fire/etc., but only those with kids 5-18 need schools).
Come on now...the ‘silent partner’, as you indicated, would not have allowed the tax problem to begin.
Scratch your back, you donate $XYZ /s
Dave's got his niche. I don't always agree with him but I respect what he's done and what he's built.
On my cynical days I'd say this is by design: set things up so that people are normally in debt and you have yourself a large lever to manipulate a large population.
Proverbs 27:7 — The rich ruleth over the poor, and the borrower is servant to the lender.
On the other hand, James 5:1-6 says:
Come now, you rich people, weep and wail for the miseries that are coming to you. Your riches have rotted, and your clothes are moth-eaten. Your gold and silver have rusted, and their rust will be evidence against you, and it will eat your flesh like fire. You have laid up treasure for the last days. Listen! The wages of the laborers who mowed your fields, which you kept back by fraud, cry out, and the cries of the harvesters have reached the ears of the Lord of hosts. You have lived on the earth in luxury and in pleasure; you have fattened your hearts in a day of slaughter. You have condemned and murdered the righteous one, who does not resist you.
Al Geiberger is a former PGA tour golfer who got into tax trouble. He said dealing with the IRS was a piece of cake compared to the state of California.
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