New National Standards for '08

[silverlotus]

What is going on with the IRS standards? It seems they are decreasing dramatically but yet, the cost of things are rising! For BK that is filed before 12/31 a two person household making our income is allowed about $1300 for food, personal care, etc. After 1/1/08 it's dropping down to $925??

These are my sources:

http://www.usdoj.gov/ust/eo/bapcpa/20071015/bci_data/national_expense_standards.htm

http://www.usdoj.gov/ust/eo/bapcpa/20080101/bci_data/national_expense_standards.htm

It seems it used to go by income, now it just goes by some average or something? Right, because a family in NYC could live on that amount as well as a family living in Texas! That makes no sense!

[jp2861]

It didn't make much sense to me either way.

Pre 2008 they allowed someone that made more to live high on the hog as compared to a lower income earner. I could never figure out why one person is afforded a higher quality of life based on income. If two people live in the same area they should have the same allowed expenses, regardless of income. It costs person A the same to live as it does person B. Yet, pre 2008 favored the higher income earner (higher allowed expenses), which wasn't fair if the living expenses for that area are the same.

Now, 2008 seems to say that living expenses are the same across the country, which we know isn't true. If they're using an average for 2008 it seems it would hurt the folks in the higher cost of living areas and help those in low cost of living areas.

Maybe they tried to fix one mistake by making another?

[silverlotus]

Wow, this sounds like any typical government decision. Which, oddly, simplifies things. LOL.

However, it's going to hurt us. So much for the idea of being able to budget for things like hair cuts, recreation, etc. In all the categories, we will barely squeak by.

How are we supposed to save money for emergencies that come up, like car repairs, doctors visits, dentist visits, etc? Even the transportation category is LESS! How can it be less when we see gas prices jump over $3 most of the time? In my area it certainly in. I live in the Mountain West where gas is pretty bad.

This is beginning to scare me. I want to be able to complete this BK but that budget does NOT look good. That does NOT look like something we can live with over the next 5 years... years which I know are going to see a dramatic rise in costs of everything. I thought I was going to have $1300 to work with! Grrr. Am I the only one who wants to say screw it all and move to some hut on a Mexican beach somewhere??

Even when I get a job after we file, I will probably have to claim it and then just pay more to the plan rather than increase our budget any.

This is so frustrating.

[lrprn]

Our US laws have not been based on reality for the majority of citizens for quite some time. They are based on trading favors between lawmakers to get things for their states (a long and glorious US tradition). But what has really tilted the balance far out of kilter has been the emphasis on making laws to maximize profit for large corporations - a direct result of all the corporate money flooding Congress for the last 20 years.

We are all in for some very bad years as the current profit-based system is finally forced to correct itself because the financial well (aka all of us non-millionaires) that has fueled this unbalanced system since the 1980s is now drying up. Eventually even the IRS won't be able to get blood from a turnip...just not there quite yet.

Recession? Yes, it's here, no matter how the media and political spin-doctors try so desperately to avoid the word.

[Granny]

How are we supposed to save money for emergencies that come up, like car repairs, doctors visits, dentist visits, etc?

There is a new category effective Jan 1 that allows for out-of-pocket medical expenses. According to the IRS if a taxpayer can prove expenses that are greater than the allowance for out of pocket medical, then the higher amount can be used...but if not, then the standard is allowed without question. When I filed a year ago, the trustee lowered the amount we had on Sch J for medical even though I could prove that is what we spent. We had no insurance, so everything was out of pocket. At least now, they are allowing something.

[BKOnce]

yes, that what's they all saying about.... When the going gets tough, the tough gets going.

[silverlotus]

There is a new category effective Jan 1 that allows for out-of-pocket medical expenses. According to the IRS if a taxpayer can prove expenses that are greater than the allowance for out of pocket medical, then the higher amount can be used...but if not, then the standard is allowed without question. When I filed a year ago, the trustee lowered the amount we had on Sch J for medical even though I could prove that is what we spent. We had no insurance, so everything was out of pocket. At least now, they are allowing something.

I'm also uninsured and I pay $250 automatically due to an ongoing medical condition for which I have receipts dating back 2 and a half years. This does not include adding more in order to save for other visits. And I know for a fact I will have to get a couple of teeth filled in the next year. I would add another $100 for my uninsured self as well as my husband for his co-pays in case he gets sick. If they would allow it.

[silverlotus]

I agree with you on all points. However, I think this will end up as more than just a recession if lawmakers don't act quickly. And they aren't going to. They will pretend they're doing us favors but it will be more of the crap they've got right now like freezing the interest rates. But you have to be current on your payments and not more than 60 days late at all within the past year among a few other rules to even qualify. That isn't alot of people that is going to be helped. My honest opinion is that they are throwing people a life raft... from shark infested waters right onto a pirate ship. Because they want people to keep their house even if it kills them financially because the big banks and corporations get paid that way. If even 60% of the homeowners with mortgage payments in the nation left their over-inflated homes and moved into smaller homes or apartments, that would be disaster for these companies, but would probably give relief to these families to be able to spend less on housing. The mortgage industry would have to make radical changes to survive and that includes bringing home prices back down to earth and getting rid of their predatory lending practices and financial options that bend the rules way back to allow someone to buy a house that is way beyond their means. Because alot of people, if a mortgage lender says they afford it then they must be able to! Nevermind that it's a 400K house and they make $40K a year. If the lender says it, it must be true!

I could write lots about it, but I need to save some for later!

Our US laws have not been based on reality for the majority of citizens for quite some time. They are based on trading favors between lawmakers to get things for their states (a long and glorious US tradition). But what has really tilted the balance far out of kilter has been the emphasis on making laws to maximize profit for large corporations - a direct result of all the corporate money flooding Congress for the last 20 years.

We are all in for some very bad years as the current profit-based system is finally forced to correct itself because the financial well (aka all of us non-millionaires) that has fueled this unbalanced system since the 1980s is now drying up. Eventually even the IRS won't be able to get blood from a turnip...just not there quite yet.

Recession? Yes, it's here, no matter how the media and political spin-doctors try so desperately to avoid the word.

[pa308]

Do these amounts only apply to the means test right? For Schedule J dont you have to try to estimate the amounts? This is where i am most confused. I am under median for PA but am working through my schedule J.

[Granny]

I'm also uninsured and I pay $250 automatically due to an ongoing medical condition for which I have receipts dating back 2 and a half years. This does not include adding more in order to save for other visits. And I know for a fact I will have to get a couple of teeth filled in the next year. I would add another $100 for my uninsured self as well as my husband for his co-pays in case he gets sick. If they would allow it.

Stand your ground on this one...I didn't because we had no on going expenses, just the cost of visiting the dr when needed, and they lowered my monthly expense and I didn't catch it. Now, we don't go to the dr. as often as we did the year before...which may come back to bite us later. Hang in there and don't let them short change you so you can continue to get the care you need.

[monkatom]

Please excuse the dumb question but am I reading the attached docs correctly. For a family of 4 making more than 5834 the exemption amount for food and clothing for the means test was 1546 and now it will be 1331 so a decrease of 215? Also the amount for utilities stays the same the only change is to food/clothing?
Thanks

[DebtHeadache]

You have me extremely nervous now. I put 4,800.00 into a Healthcare expense reimbursement fund and I go through this amount by mid year. Will this cause me grief when I file in February? Or will this be in addition to?

I have not seen an attorney yet. I am planning on interviewing 2 attorney's in January. So I am looking for answer from all the experts on this forum.

[silverlotus]

Hopefully I am answering your question correctly, but it seems to me that instead of being based on your income, after Jan 1st, it will be based on the amount of people in your household. No matter where you live in the nation, whether you are in the most expensive city or the cheapest podunk town your allowances are the same. Our gross pay is over the $5384 listed on the IRS standards in effect until 12/31. So we would be allowed $1306 for all household expenses. After Jan 1st, it appears that it will go down to $925. They are making it a flat rate.

We live in an expensive area (an expensive state, truth be told) and $925 is a JOKE. That is why we make over the $5384 gross -- it is the going salary for this area for my husbands job and obviously, we have 1 car payment, an apartment and debt over our heads so it's not like we are living rich here! But they are going to take $381 from our allowed expenses. This is what you put on your means test apparently. I do not know how that relates to a Schedule J. It was my understanding that with current law, you prove how much you make UP TO the $1306 and all is well. You'd have to get more than that approved by the trustee with documentation showing that it is really a need. The new rules will allow you to claim the maximum without being questioned. But if you want more, you will be questioned and you will have to show proof of the need.

The cost for rent, mortgage and utilities is not on this list. If you are filing after 1/1/08 then go here (http://www.usdoj.gov/ust/eo/bapcpa/2...anstesting.htm) and scroll down to Local Standards and select your state. My rent and utility allowance went up a little. My transportation allowance for operating costs went down by $80. Because gas and insurance and repairs is getting CHEAPER, right?? UGH.

Please excuse the dumb question but am I reading the attached docs correctly. For a family of 4 making more than 5834 the exemption amount for food and clothing for the means test was 1546 and now it will be 1331 so a decrease of 215? Also the amount for utilities stays the same the only change is to food/clothing?
Thanks

[silverlotus]

I'm sorry to make you nervous! I quit breathing for a minute when I took the means test for filers after Jan. 1st and saw that we were allowed so much less.

I wish I could tell you about your Healthcare fund. I know that you are in fact allowed a health savings account and you are allowed to continue contributing to it and claim it as an expense on your Means Test. Consult several attorney's very soon! If you are filing in Feb, you want to give yourself 30-45 days after retaining an attorney before you actually file. You want your paperwork all in order and ready to go before you file. It will lessen your headache! (Sorry, bad pun!)

You have me extremely nervous now. I put 4,800.00 into a Healthcare expense reimbursement fund and I go through this amount by mid year. Will this cause me grief when I file in February? Or will this be in addition to?

I have not seen an attorney yet. I am planning on interviewing 2 attorney's in January. So I am looking for answer from all the experts on this forum.

[silverlotus]

I am too. I do not know how the Means Test and IRS Standards fit in with the Schedule J. I would only assume that if your expenses are higher than the IRS Standards listed on the Means Test you will have to prove that it is a real expense that you need to be allowed.

And since no one has filed after the 1st yet with these new laws, we can only wait until the first round of guinea pigs to the new law posts about it, letting us in on the results.

We aren't even planning on filing until March-May. The laws could change yet again before I file! BK is an insane game.

Do these amounts only apply to the means test right? For Schedule J dont you have to try to estimate the amounts? This is where i am most confused. I am under median for PA but am working through my schedule J.