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Posts tagged with: Taxes

IRS Update: Payment Plan Default!!!

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Well isn’t the IRS just a bucket of sunshine to deal with? (Said dripping with sarcasm)

I wrote (here) about how the IRS was one of my top 3 organizations/entities that I hated dealing with (the other two, Navient and Social Security Administration are still at the top of my S-list, too!)

How it all started…

We owed a lot of money for our 2016 taxes and it took us a LOOOOOOONG time to set up a payment plan. I explained the whole back-story and why it was taking so long in this old post from back in October 2017. Basically, to initiate a payment plan we had to sign an agreement that said we agreed with the tax debt owed. Under advice of our CPA, we were trying to contest a portion of the amount due so we couldn’t arrange a payment plan for the remaining balance since we wouldn’t sign to agree to the full debt. It took a long time and a lot of back-and-forth to come to an agreement. We finally did that in October of 2017 (again – this is for taxes that were due for tax year 2016). That’s a reallllllly long time to come to an agreement!

So here we are, faithfully making our monthly payments. I have never missed a month and never been late with a payment.

Things unraveled quickly…

Imagine my surprise, then, when I opened an incredibly thick envelope from the IRS to receive a notice:

“Send us $XX,XXX [full amount of taxes owed] or we may seize (levy) your property on or after July 18, 2018.”

WTF??? What are they talking about? We’ve been making our agreed monthly payments faithfully! Why would they demand full payment within one month??? Or else they’ll seize our property???? Holy crap!!!

That was sufficient to scare the crap out of me. The IRS means business.

I logged into my online account where I always make payments. All of my payments have been recorded as normal. I tried to click to view our payment plan information, but it says the system is not available and provides a phone number to call. It literally took me 3 days of nearly constant calling to connect with an individual. I kept getting a message that “due to high call volume, we cannot accept your call at this time.” Finally today I made it into the cue to wait to speak with a real person. Per usual, it took over a half hour before I was even able to get someone on the phone.

When I finally got a person on the line, I explained the situation. It took her a little bit of digging into the account but then she discovered, we’ve been considered defaulted on our payment agreement since November 2017 (it was just established in October 2017, so November was our very first scheduled payment!!!)

I’ve always done direct payments on the IRS website. When I do so, I have entered my social security number to identify the tax debt. But when we filed our 2016 taxes, we filed as married filing jointly and used my husband’s social as the primary. Because I had made our payments with my social security number instead of my husbands’, they didn’t register as normal monthly payments. Someone had to manually change the payments every month from my social to the joint filing account (which is why I did, indeed, receive credit for the payments). But because of the way the system works, if it’s not filed under hubs’ social security number, the system considers the payment to have NOT been made. And it immediately considered us to be in default.

Our payment plan is no longer even in place!

Even though I’ve been making every single payment on time every single month. Even though I never received any notification of default. Even though I had no idea I had to make the payments under hubs’ social or else it wouldn’t “count” in the system.

I have to start all over. We have to re-do the whole payment plan. The real pain with this (in addition to the waste of time and stress, etc), is that there’s a $225 fee to set up a new payment plan. There’s apparently no way to waive this fee given the circumstances (the representative even said she felt bad for us and that she personally thought it was unfair, but her hands are tied). There are cheaper ways to set up the plan: I could do it online or I could schedule auto-debit (instead of paying direct-pay as I had been doing). When I explained that I’d tried to see the payment plans in the IRS’s online system and it wouldn’t let me and told me I had to call to speak to a representative, she said “oh sorry, I guess that’s not an option for you.” She said there’s a new online system and that some people simply are not eligible to set up payments through the online system. She didn’t explain whether there was rhyme or reason for this (e.g., Is it because we owe over $10,000?? Is it because the system says we’ve defaulted on a previous payment plan??? No one knows).

Establishing a new payment plan

I will receive a new payment plan agreement in the mail and I’ll be charged a lesser amount if I agree to the auto-debit (which is what I’ll do), but it’s still a fee of $149 to establish the payment plan. The same payment plan that I already thought we had in place. That I was already paying toward every month. Or so I thought. UGH.

Thankfully, the representative said she does not believe we will be at risk of having our property seized as the IRS notice indicated. If we set up an auto-draft where the IRS has direct access to debit from our bank account, we should be fine. They will only debit the agreed-upon monthly payment and the auto-debit will also eliminate the possibility of incorrect payment. Since I will no longer be doing direct-pay, I won’t be entering a social security number one way or the other – the payment will just be taken and applied appropriately.

A huge pain in the butt and a costly lesson to have to re-establish a payment plan. But hopefully (fingers crossed????) this should resolve the issue. And we’ll continue making the same payment we’ve been making all along so nothing changes in terms of our monthly budget.

Have you ever experienced something similar when dealing with the IRS? I’m still shocked I never received any notice of default. Until this notice that the IRS was going to seize our property, I had no indication whatsoever of a problem! Scary stuff!

 


Open Enrollment

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First, thanks so much for the many thoughtful (and kind!) comments on my budget post. When I saw the comment count shoot up it made me nervous to read through them, but almost everyone was really very kind and forgiving (and generous in offering support, tips, advice, etc.) THANK YOU!

Speaking to one of the common comment themes I saw – many people asked about my take-home pay. For a $95k salary, my take-home ($2440/biweekly) is pretty low. The reason for this is that I have a LOT of things withheld and/or paid from my check pre-tax. This list includes the following (all numbers from my most recent paycheck):

  • Medical insurance ($125.50/check)
  • Dental insurance ($52.28/check)
  • FSA – Health ($68.37/check)
  • FSA – Dependent Care ($136.75/check)
  • Retirement account (required and already investing at the lowest amount so no chance to reduce – $256.91/check)
  • Parking permit ($38.45/check)

Plus, of course, all my taxes as well ($552.13 from my last check).

If I added this all up correctly, that comes to a whopping $1230.39 taken from my check before it hits my direct deposit! WHOA! That’s a third of my check!

So the question came up – can I change some of these things so I can get back more money per paycheck. And the answer is – YES! Right now is my open enrollment period and I’d LOVE to have some help with figuring things out! Let me address things one at a time.

Taxes

I can likely lower my tax withholdings per check, but have opted not to make any changes right now. Taxes are not part of my open enrollment, so I can change those at any time. Based on what feels best to me (and many comments/advice I’ve received), I’m going to do our 2017 taxes ASAP once the new year hits. That will give us a better feel for how much we really owe and we can make adjustments accordingly. Given our huge tax debt (that we’ll be paying on for what feels like a lifetime), we’ve opted NOT to reduce our withholdings for the time being. We’re likely over-paying a little this year, but we feel okay with that – any extra money can go to help reduce the tax bill and we can re-adjust after the CPA has gone over everything.

Retirement, Dental, Parking

These are all pretty well “set” and cannot be changed. We have limited options for dental – I can decline the insurance, but we use it and need it. So it stays. In terms of parking, I live too far to walk/bike and don’t have anyone living nearby to ride-share with. So unless I switch up my Mom car for a motorcycle (never happening), this bill is pretty much “set” too. Retirement is required by my employer. I used to invest a full 10%, but have reduced down to the minimum (7%) already. No way to make this any lower.

Medical 

So here is where I could REALLY use some advice. Currently, we have a PPO plan and this entire year I’ve been thinking that, come open enrollment, we’d switch to a HSA. But when I started really doing some research to compare the two options, I think we’d end up spending MORE with the HSA. Yes, we’d save on monthly premiums, but the out-of-pocket costs and deductibles are much higher.  Here are some side-by-side comparisons I put together. What do you think?

Health Savings AccountPPO 
Per-paycheck Premium$61$150 (note: this is more than listed above because premiums are going up)
Overall DeductibleIn-network:

$1300/employee; $2600/family

In-network:

$500/employee; $1,000/family

Other DeductiblesNon-preventive prescription coverage:

$1300/employee; $2600/family

None
Out-of-pocket limitIn-network:

$2,000/employee; $4,000/family

In-network:

$1,000/employee; $2,000/family

Not included in out-of-pocket limitPremiums and health care not covered by the planPremiums, drug co-pays, and health care not covered by the plan
Annual limit on what the plan paysNoneNone
Costs for common services with in-network providers.

Primary care to treat illness or injury

Specialist visit

Other practitioner office visit

Preventive care /screening

Diagnostic (x-ray, blood work)

Imaging (CT/PET/MRI)

Mental health

Generic drugs

 

 

10% co-insurance

10% co-insurance

10% co-insurance

No charge

10% co-insurance

10% co-insurance

10% co-insurance

non-preventive: 100% until deductible is met. Preventive: $10 copay

 

 

$15 copay

$30 copay

$10 copay for OB/GYN

$15 copay primary care; $10 OB/GYN

No charge

No charge

$15 copay

$10 copay

 

I receive biweekly pay (26 checks/year). So the HSA annual premium is $1586. The PPO annual premium is $3900 (a difference of $2314). But if we’re having to pay $2600 for our family health deductible + $2600 for the prescription deductible (compared to a $1,000 deductible for the PPO plan), I think it’s just too much money out-of-pocket! (though, caveat, I’m no expert with healthcare – does the out-of-pocket max only apply to healthcare, or would that also include prescription coverage??)

My thought is that we’d be better to stay in the PPO. It also scares me to think of paying 10% of any imaging, diagnostic, etc. We’ve been lucky thus far (knock on wood), but we have young kids – broken bones are a given at some point, right?

Those more experienced than I am – thoughts?

Flex Spending Accounts

The dependent care account contributions will decrease in 2018 and even moreso in 2019. Right now, we still have hefty monthly bills. Our girls are in kindergarten and, though half-day kinder is state-subsidized, the state does not cover the costs of full-day kinder. We pay that. The total was actually right about $1,000/month, but we paid out of our FSA a huge chunk for one of our kids’ entire semester of tuition (for which we received a discount). We’ve been paying the remaining costs out-of-pocket (the dependent care FSA was depleted months ago).  For next year, we’ll only have one semester worth of full-day kinder costs (the second half of the year they’ll advance to first grade – totally free!), plus the costs of care for summer and after-care, as needed. (Note: several people have suggested that hubs take over childcare so I just wanted to address that here:  hubs does handle the bulk of childcare. Where we live, half-day kinder is 8:30-11:30am. Hubs is in classes full-time that extends well beyond that timeframe. The full day kinder program is 8:30-3:00pm. Currently, hubs gets the girls at 3:00pm every day except Wednesday – his long day – so we pay very little in “after care” at the present time. Just one day per week. This arrangement is unlikely to change for the rest of the academic year).

Bottom line, we should be able to lower the amount of FSA money withheld for dependent care for next year, thus increasing the size of my take-home pay.

The health care FSA is entirely dependent upon whichever medical plan we choose. If we get the HSA, we’ll use the health savings account. If we keep the PPO, we’ll keep a flex spending account for medical expenses. This year, we put $1750 in our health FSA and it was not nearly enough. If we keep the PPO, we’ll increase our health FSA contributions probably to about $2250-ish (though I’d need to crunch numbers first).

So the big question is…..HSA or PPO (with a FSA)? Pros and cons? What are your thoughts and why?


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