Why Dave Ramsey says it’s time for San Francisco couple who owe the IRS $120K to think of their $350K income as $50K

Nikki and her 2nd husband, who unrecorded successful the San Francisco Bay Area, are $300,000 successful indebtedness — and $120,000 of that is owed to the IRS. While they’ve acceptable up a outgo plan, the IRS has already sent notices for liens and levies.

After divorcing her archetypal husband, Nikki abruptly had 3 kids to look aft connected her own. “I virtually conscionable enactment my caput down and worked and worked and worked conscionable to support a extortion implicit our head. I did not record taxes astir apt for astir 4 years,” she told The Ramsey Show (1).

• Thanks to Jeff Bezos, you tin present go a landlord for arsenic small arsenic $100 — and no, you don't person to woody with tenants oregon hole freezers. Here's how

• Robert Kiyosaki says this 1 plus volition surge 400% successful a twelvemonth — and helium begs investors not to miss its ‘explosion'

• Dave Ramsey warns astir 50% of Americans are making 1 large Social Security mistake — here’s what it is and 3 elemental steps to hole it ASAP

She remarried successful 2023 and is present moving arsenic a nurse. Together, they marque a combined income of $350,000.

But speech from their taxation debt, the mates owes astir $100,000 successful pupil loans and different $80,000 successful recognition paper debt, though they’ve been paying that down since they got married. They wage $5,000 a period for their mortgage, which — arsenic Ramsey points retired — isn’t atrocious for their region.

“You guys are surviving a Bay manner and you’re eating up your 300 expansive and you’re not making overmuch advancement connected this debt,” helium said. “You’re broke. Act similar it. And onslaught this indebtedness with a vengeance.”

Here’s wherefore Ramsey says it’s clip to deliberation of their $350K income arsenic $50K instead.

If you can’t wage your taxes by the filing owed date, past you could extremity up paying involvement connected immoderate equilibrium you beryllium and a monthly precocious outgo penalty. Plus, there’s an further punishment for failing to record a taxation return. So adjacent if you can’t wage your equilibrium successful full, it inactive makes consciousness to record your instrumentality connected time.

The IRS charges involvement regular connected unpaid balances; it besides charges involvement connected penalties, and determination are a batch of different penalties, excessively (2). So the longer you hold to wage your taxation debt, the worse it gets. Penalties tin scope up to 25% of the unpaid equilibrium (3).

You whitethorn beryllium capable to acceptable up a outgo plan, if you qualify. Depending connected your situation, you person 2 options: a short-term oregon a semipermanent outgo plan.

If you tin wage disconnected your taxation indebtedness wrong 180 days and beryllium little than $100,000 successful tax, penalties and involvement combined, past you whitethorn beryllium eligible for a short-term outgo plan. If you request much time, a semipermanent outgo program could beryllium an enactment — if you beryllium $50,000 oregon little and person filed each your taxation returns. With a semipermanent outgo plan, you wage disconnected your taxation indebtedness successful monthly installments for up to six years (4).