Highlights from the Dave Ramsey Show

QUESTION: David in Montana is a college and career counselor. He's working with a senior in high school who just found out her dad is not planning to file taxes and hasn't done so for five or six years. She won't receive $5,000–6,000 in grant money if these taxes aren't filed. Dave warns David that his approach has to be careful.

ANSWER: The problem is, you're—on behalf of his daughter—walking into a man's house with muddy boots on, trying to tell him how to live his life even though what he's doing is stupid. I agree with that. It's stupid on two fronts. One is not filing your taxes is what's known as a criminal act. Not filing them for five years will get you put in jail. It's a problem. Yes, it's stupid—not to mention that his daughter is going to miss out on $5,000 or $6,000 worth of money here, and he doesn't seem to care, which is kind of weird except that he's scared about it.

He has come a long way for a guy who doesn't fill out taxes, because a FAFSA is harder to fill out than taxes.

He's just afraid. He doesn't know what to do, and he's stuck.

Here's what you might try to do, and you're going to have to be very careful with this because you're going to create an explosion if you're not. I can just tell you A) he's an entrepreneur and B) he's resistant to this, and C) he's not asking your opinion. You're really walking in here with muddy boots into his living room. If you can get a cup of coffee with him somehow and offer to help ... I would just say, "So-and-so told me that you haven't filed in five years, and so that makes it very difficult for you to file now, which presents a problem for her because she doesn't get the $6,000 worth of money. Truthfully, sir, it's a problem for you. I wouldn't want to see you get into trouble. If I could help you, I'd love to help you. What I could do is I'll get with one of Dave Ramsey's Endorsed Local Providers—the CPAs—that know how to catch up back taxes like this and know how to help you get filed. You might not even owe any taxes. But not filing is a criminal offense, and I wouldn't want you to get in trouble." Don't let him accidentally think you're threatening him with that, because you're not. You're just saying you don't want this for him, and you're trying to help him. In the process of doing that, of course, the kid's going to get the grants. He could get this mess cleaned up and she could get the grants, and you can help him hook up with a CPA that works with people who haven't filed for several years. If you were in his shoes, you'd be kind of scared. Just try to get over on his side of the problem and offer to lift. If you get much resistance, you're probably done.

You could also bring up that he has other kids coming up, so this is $6,000 per year per kid. This is probably worth $50,000 or $100,000 to his family in money that's available for them to get an education, and he doesn't have to worry then about not having filed his taxes or worry about the IRS come calling with a criminal thing.

Even if he saw it as a big help to his family, he might not be able to see his own way through getting this problem solved. That's why I'm saying if you can direct him, go to our website daveramsey.com, click on CPA under ELP (Endorsed Local Provider) for taxes, and they're used to working with people "coming in out of the cold." If you don't do that—and I don't want you to say this to him because he may take it as a threat, and I don't want to push that button with a guy like this—you could tell him that a financial coach told you if you come to the IRS, they don't press criminal charges hardly ever, but if they find you, that's when they do it. It's much safer for him if he comes in out of the cold on his own. That's the truth.

I think he's stuck in not knowing what to do about him while still trying to love his kid well. If we can help him get unstuck without him perceiving that as a threat or that you're minding his business for him—if you push either one of those buttons, you're going to have trouble.

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QUESTION: Bryce in Ohio and his wife are trying to decide where they should put their $6,800 tax refund. They have a car with a $6,000 loan plus some other debt. They've considered paying off the car and selling it to buy a cheaper one. Dave doesn't think their car is too much compared to their income.

ANSWER: I don't think this car is out of your price range. You've got the money to pay it off. I would pay it off and keep working your debt snowball. The rule of thumb we use is if you can be debt-free within two years not counting your house. In this case, yes. Also, does the value of your vehicles add up to be more than half of your annual income? If they do, you have too much money tied up in things going down in value. That's not the case here.

The car isn't your problem. The problem is that you just started this fight. Adjust your take-home pay. That big of a tax return is not something you want to get. You'll get some on unearned income tax credit, but adjust your W-2.

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Question: Natalie in Indianapolis received a surprise job proposition making $15,000 more a year. However, she'd have to move to another county within six months of accepting the job. Natalie and her husband purchased a house about two years ago with the $8,000 tax credit. They can't move until next April. Dave offers some ideas to handle this.

Dave Ramsey's advice: When you've only got 90 days, you live in the house up until the six-month mark. You put it on the market. Closing cannot be allowed sooner than the three-year date. Up close to the time, I'd put it on the market, like in January. Move when you need to move, and the house is empty for 90 days. That's not going to violate the primary residence requirement. You're going to be fine. You can't rent it, and you can't let them move in it early. You can't close the sale prior to that. So when you put it on the market in January, it's for an April closing.

Rent something in the meantime. If you're going to move before April, you're going to rent. Option number two is asking the county you're going to work for if they'll give you a special exception to give you nine months instead of six months to move. Then put the house on the market and move.

Either way, you're going to move at the six-month or nine-month mark, and your house is not going to be closed. You need to rent on the other end until your house gets closed. I'm not going to own two houses. That's not going to make this deal work. Plan on renting. Ask for a special exception, or move at the six-month mark with your home sitting empty for three months. At any point that someone gives you an offer, you cannot allow it to close prior to one day longer than three years. And they cannot move in it. Do not get yourself in trouble on this. It's not worth it for a little bit of money here or there, because it's going to be $8,000 if you screw this up.

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