IRS Rental Allowance Question

[berrymom31]

We are moving very soon. We found a rental house and the rent is 900 per month..which I think is reasonable for a four bedroom rental. In the area we live in now the IRS rental standard is 866....so we figured it wasn't far off. Well, we are moving to the town we grew up in...and it's about 45 minutes away from where we are now. I just checked and the IRS standard for rent for a five person family is 588! How in the world does that seem fair!!!!!

So, my question is...where does the extra 300 come into play? Do we just have to eat it? Or does schedules I and J account for this. Also, the standard operating expense for two cars is 360....and with the commute and gas prices...we will easily spend at least 100 or 150 more than this for gas each month. My atty said that once the means test is failed...thats where schedules I and J come into play...thats were we list every single actual expense. After this are we just at the mercy of the trustee to approve what we have on the schedules? I'm guessing over the next 6 months we should keep our gas receipts, grocery receipts, rent receipts and so forth right?

[Frogge]

I'm pretty sure that the trustee will allow your additional gas expenses based on circumstances.. I would definitely keep your receipts for gas. We're doing that because we spend $520/mo. for 2 cars

[Help!]

Depending on your case (and your district, and your assigned UST), you may or may not be held to the IRS Standards for housing. $588 for a family of five seems impossibly low... are you sure you're reading the table right? I can't even imagine that!!!

Yes, the actual expenses (not the IRS Standards) are used in Schedules I and J. The only problem is that you *must* pass the means test in order for Schedules I and J to be considered. The means test is the first thing the UST looks at, and it is the first obstacle you must overcome.

There is a common misconception that your circumstances in their totality are considered when you file Ch. 7, and that if you don't quite meet the means test another part of your petition will give you some leeway. That is absolutely untrue when you are above median... the means test is the key!

[berrymom31]

Oh, so if we fail the means test then it's over? I thought if you pass the means test they you can file no matter what? Why do schedules I and J even exist if it's not for the people who might barely pass for a 7. When I do the means test calculator at legalconsumer.com without my income and only my husbands which is about 9 thousand over the median income...we have about 300 in disposable income. However, this is with the 588 rent for the county in which we live and only allowing 360 for gas for someone who commutes back and forth to work...and spends at the very least 100 more than that.

When do they start figuring in money for entertainment and other activities? I know these things are not "required" to live, but I've read on tons of posts that they are allowed...however they are not on the means test.

What recourse do we have if we simply don't have the 300 at the end of the month because our actual expenses are more than the IRS tables...I mean...588 is just ridiculous...and yes I rechecked it. It's Missouri in Henry county......it's sort of a small town, but not really.....probably 50,000 or more people there.......They allow us over 500 for utilities, but only 588 for rent...we couldn't find another house to rent we could all fit in. Even in this house, hubby and I are converting a room to a bedroom for us that was not purposed for a bed room! So, it's basically a 3 bedroom unit.....I'm so frustrated!

[laurannm]

Keep in mind on the means test, particularly for transportation expenses (such as gas, etc.) you are not allowed to use your actual expenses....you must use the IRS standards.

You are also not allowed to use such expenses as entertainment, activities, etc on the means test. That's why you don't see them. Those typically go on the Schedule J.


If you were to wait and file a few months later, will there be any change in your income (a decrease, or a bonus payment falling outside the 6-month look back, etc.)?

[berrymom31]

Right now, our income is around 100,000 and I'm quitting my job and we are waiting 6 months and then are going to file....my hubbys income is 9,000 above the median...so yes there will be a change, but it is still slightly over the median.

I thought we don't use schedules I and J unless we pass the means test? I'm just confused.......why would there be schedules I and J if the person already passes the means test?

[berrymom31]

Ok, I just went back to the means test and there is a section under housing and utilities that asks for the amount of the difference you are paying in rent and why you think it's feasible....what are the chances of the trustee letting this side?

but what I don't see, is any place to enter in our car insurance...health and life...but not car...that would be another 150.

Adding the extra money for rent, if it accepted, we pass it....with $2 in disposable income....

[Help!]

The goal is to get a result that allows you to check the box "the presumption does not arise" on the means test using only IRS Standards or exceeding them only when there is no "reasonable alternative" to the expense. If you exclude your income and look six months forward, would your calculation give you this result?

An example of an expense exceeding IRS Standards for which there is no "reasonable alternative" could be something like higher fuel expense because you have a 60 mile one-way commute to your job. Or, healthcare expenses that are higher than the IRS Standards because of a specific health condition. It has even been decided in some districts that a 401K contribution is not an allowed expense because it is voluntary. Exceptions to the IRS Standards are allowed on a case-by-case basis, no guarantees.

[Frogge]

Keep in mind on the means test, particularly for transportation expenses (such as gas, etc.) you are not allowed to use your actual expenses....you must use the IRS standards.

You are also not allowed to use such expenses as entertainment, activities, etc on the means test. That's why you don't see them. Those typically go on the Schedule J.


If you were to wait and file a few months later, will there be any change in your income (a decrease, or a bonus payment falling outside the 6-month look back, etc.)?

I read something about gasoline costing more per month and the attorney handing over receipts to the trustee to prove (and successfully adjust) the amount. I must have read this wrong ? We are allowed $366 but spend over$500 in gas because of our commutes ..we do have a $200 allowance for DH's 4Runner having 180,000 miles on it - would that be added to the auto expense then?

[berrymom31]

Frogee...I just don't know!!! It's killing me. The 366 is certainly not fair..my husband has to fill up twice a week at 70 a pop now, and when we live further away...wow....I'm thinking now it would be even more than I originally stated.

I didn't know that we get an allowance for a vehicle with high miles....is that for repairs and such? My van has over 120,000...we bought it after we gave up new tahoe a couple of months ago.

I think we are going to go the next 6 months, save all our gas receipts, save grocery receipts, save receipts for dance classes, pre-school tuition and sports sigh up fees....this sounds like a lot..but not really. Sports are one payment once per year and is usually less than $100 each time. Dance, where we are is 70 per month, but we are planning to scale it down in this new town we are moving too....we still want her to do it, but maybe only one class per week instead of 2. And, pre-school...this will the the final year for that so they may not take that into account....something tells me not..all I can do is save all my receipts and hope for the best. I guess worst case scenario is 13 and since we have scaled income down...at least our payment wouldn't be outrageous right?

I just need to relax, focus on getting moved and settled, and on my family...and pray everything turns out okay.

Sorry, this turned into a lecture to myself!!

[Help!]

Berrymom, I hate to be the bearer of bad news here, but the dance classes and sports fees aren't going to fly on Schedule J unless they are included in your total "recreation" expense (for a family of 5 should be about $200/mo. tops). Pre-school tuition isn't going to be allowed unless its necessary for you to work.

Expenses are BASIC LIVING EXPENSES, those necessary to keep your family housed, clothed, fed and to get your husband to and from work (assuming you won't be working). Aside from these necessities, the most you're ever going to be allowed is a couple hundred dollars per month extra... and that has to cover everything else.

You can't have "disposable income" as that would imply you have at least some ability to repay creditors. If you put things that are not basic living expenses on your petition, you are predisposing your case to being dismissed for abuse.

I am not trying to be critical, only trying to help.

[Cali]

My rent, gas and food were higher than the IRS standards.

There is now way my attorney would have let me put dance or sports as an expense. In fact we had to scale the entertainment down to less than we actually spent.

[berrymom31]

Where do you even enter entertainment? It's not on the means test..is it on schedule I and J? If we fail the means test then do they not consider entertainment? Or, is this included on the section entitled "extra expenses".

I'm not worried about dance or sports as I think I can find that money in my food, clothing, household allowance....especially sports since it's just one payment each per year.....and dance will probably be less than 50 per month.

[laurannm]

Where do you even enter entertainment? It's not on the means test..is it on schedule I and J? If we fail the means test then do they not consider entertainment? Or, is this included on the section entitled "extra expenses".

I'm not worried about dance or sports as I think I can find that money in my food, clothing, household allowance....especially sports since it's just one payment each per year.....and dance will probably be less than 50 per month.

Correct, the means test does not allow for entertainment expenses. On your Schedule J there is a listing for Recreation, but as Help stated, you need to make sure this amount is reasonable. Your attorney can tell you what will fly and what won't in your district.

The first thing the UST will look at is to make sure your means test is accurate. They will actually submit their version of the means test with any corrected amounts (based on documentation they may ask you to proivde, such as pay stubs, bank statements, etc.). If you are unable to pass the means test, then the UST will force a you to convert to a 13 or be dismissed.

Means test is step 1. If you pass that then it's on to step 2, which is your schedules I & J. This where the "totality of circumstances" comes into play. This is your current monthly income and actual expenses (such as recreation, tuition, etc...plus all of the other little expenses you may have forgotten about) General rule of thumb is you want to show a maximum of $100 disposable income at the end of the month on your schedules. If you show anything more than $100 than the UST may try to force you into a Ch 13. But you want to be careful on what you list on the schedule J....try to stay as close to IRS standards as possible. Anything over and make sure you have receipts\documentation to justify it. Your lawyer should have an idea as to what amounts the trustees are used to seeing in your area.

[liz417]

I'm pretty sure that the trustee will allow your additional gas expenses based on circumstances.. I would definitely keep your receipts for gas. We're doing that because we spend $520/mo. for 2 cars

We are saving those gas receipts too, we spend over $500/mth for 2 cars.