About half way through 2008, the housing market bubble was revealed for the house of cards it was, and it imploded. Taking the economy, and business number 3, with it.
And that, my friends, is where our real trouble began.
Scott, already under the tremendous weight of running 2 business and being responsible for not just our livelihood, but other people’s as well (which had already started giving him panic attacks 2 years before), was losing his mind, trying desperately to keep business number 3 on its feet and keep all of our heads above water.
I finally realized how much trouble we were in at the end of August, a week before we were supposed to leave on an annual trip to Las Vegas for business number 4. We had the mortgage and park rent due while we would be gone, and Scott did not have enough money to give me anything for the monthly bills and still be able to pay for the business trip. I knew then we were fucked. We cancelled the business trip so we could pay our bills.
And then October rolled around, and with it, our taxes. And for the first time ever, we couldn’t pay them when we filed. Queue the avalanche.
My spreadsheets don’t go back that far (it was a few years before I started maniacally budgeting everything), and I can’t find the tax documents for that year, but I did find the estimate from the year before, which shows the estimated quarterly tax payments we should have been paying, totaling just under $28,000 (which may be on the low side, since Scott was still growing the businesses).
2009 was a rough year. Even though things were bad and getting worse each day, we did not cut back on our spending drastically enough or soon enough (bad habits are so hard to break) and the few thousand dollars on credit cards multiplied.
Scott shuttered business number 4 to stop the hemorrhaging and managed to claw a little more money (less and less each month) out of business number 3 while starting business number 5, his first on his own. Business number 5 made money, but it was a fraction of what he had been making with business number 3. The company I work for, also hit hard by the downturn in the economy, had to layoff a third of their employees. I was fortunate to be considered essential, so I held onto my job. Unfortunately, I had not been advocating for myself for the previous 2 years, so I was making roughly the same amount of money I had been making in 2006. There was no way I was getting a raise.
We made payments to IRS, but were unable to pay the entire amount we owed, and in April, we once again filed an extension.
Our aging dog was diagnosed with Cushing’s Disease. The medication cost $100 a month. Some months we couldn’t afford to get it for her.
Come October, we could not pay the tax bill that was due. I don’t have the tax documents for that year either, but my estimate is at least half what we owed the previous year (the beginning of 2008, business had been great).
My car, which we had finally paid off, had become unreliable over the summer. The gauges would just suddenly die while I was driving down the road. It also randomly wouldn’t start. It wouldn’t even try. I would just get a dry click. There were several afternoons when I sat in the parking lot at work for 20 minutes or more waiting for it to finally start. We couldn’t afford another car payment. So, we traded in Scott’s car for another new car with lower payments and much better gas mileage.
Things improved in 2010. Scott got hired to work for someone else for the first time in more than a decade. His salary was very good, but it was half what he had been making at the height of business number 3’s success. Still, it was enough to start paying several thousand dollars a month on our IRS and credit card debt.
We once again filed an extension in April, filed our return in October, and could not pay the $10,000 bill that was due. We weren’t saving any money. All our extra income was going to paying down debt.
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And again in 2011.
In August, our old girl developed bloat. When we brought her to the emergency vet, they also discovered she had an enlarged spleen (which was the complete opposite of what she should have had due to the bloat), and abdominal tumors. They said they could do surgery, but at her age, only a couple months shy of 14, they didn’t know if she would survive. And if she did, there was a significant chance she would have a heart attack afterwards from the stress the bloat, enlarged spleen and surgery had put on her body. Then there were the tumors. It was a terrible decision to have to make (it always is, no matter how old or sick they are), but we decided to let her go instead of putting her through all that.
In the beginning of October, our dog being gone was getting to Scott. For me, it hit me that she was gone every night when I came home, and she wasn’t there to greet me, but for Scott, who worked from home, it was all day, every day. So, when he sent me a picture of a litter of black, long-eared, houndy puppies, I couldn’t tell him no.
Later that month when we filed our taxes, the amount we owed, and did not have, was $25,000.
The IRS is probably the most terrifying legal entity to owe money to. They can’t break your legs, but the have an incredibly long reach. Scott was frankly terrified of them, and I wasn’t exactly enthusiastic about dealing with them either, but his strategy of ignore the problem and maybe it will go away was not working. They sent us regular letters in the mail, detailing how much tax we owed and telling us to call them or they would take further action. We did not. Then they started sending us certified letters. We never retrieved them from the post office. Then they filed levies against us for each year we had outstanding tax. It changed nothing. We couldn’t pay the amount in full. Not even if we sold everything we had. Our net worth was negative. Very negative.
In 2012, Scott was so freaked out and so stressed out about the entire mess, he didn’t file our taxes at all that year. Queue an even bigger avalanche.
In 2013, IRS had had enough of our bullshit. They started the process to levy Scott’s paycheck and sent an agent to our door (which is what they do if you don’t pay any attention to anything else they do). She explained that we had to set up a meeting to go in and talk to them about what we owed, and the year we had missed, or they would take a majority of Scott’s paycheck without our input. We gathered up all our financial information, and Scott went to meet with her, file the 2012 return (which would have been $5,000 if we had filed when we were supposed to, but was now over $12,000 with penalties, fees and interest) and hash out an installment agreement, where they decided what we would pay each month after reviewing our expenses.
They decided we could afford $2,500.
It hurt. It was nearly 40% of our take home pay. But she had actually let us off easier than she could have (she was allowing us to at least pay the minimums on the credit card debt, which they don’t have to do). At this rate, we would have the $71,000 in tax debt we owed paid off within 3 years.
Finally, a little light at the end of the tunnel.
Within 6 months, Scott was laid off from his well paying job. We couldn’t pay the amount we had agreed to in the installment agreement. Even though I had gotten a promotion and a substantial raise a month before he was laid off, $2,500 was more than 85% of my take home pay for a month. We breached our agreement, which nullified it.
We were once again well and truly fucked.