This past fall, my mom decided to sell her 2006 Honda Pilot and upgrade to a new Pilot. My wife and I had been getting by with just our van for a few months, but we were ready to have a second car again.

So: Rather than go car shopping, we decided to buy my mom’s used Pilot. It had relatively low miles and was still in good condition. Plus, my mom was willing to give us a good price.

I called up USAA because they offer really good rates on car loans. I was already pre-approved, so the car loan was processed quickly. Of course, I had to decide how much of the car I wanted to finance, as well as if I wanted extra to cover the sales tax.

I casually decided to add an extra $500 onto the loan amount to cover the tax I expected I would have to pay. What I didn’t count on was how high the sales tax would be.

(Just a side note, for those purchasing brand new cars, the sales tax is usually deductible. Keep that in mind when it comes time to file taxes as it could save you a bundle. However, tax implications can vary state to state, so check online or with a professional to see what you do and do not qualify for.)

When I went to the DMV to pay the taxes and get my license plates, I discovered that the sales tax was nearly three times what I had budgeted! Talk about a shocker.

For the record, I live in Parker, Colorado, which has a sales tax rate of 8.1%. A used car purchase of $17,500 generates a tax of $1,417.50. Yikes!

In hindsight, I should have listened to that little voice in the back of my head that said, “Ryan, you should probably check the sales tax rate to see how much it’s going to cost you.” If I had done that in advance, it might have changed my decision to buy the car and/or changed the amount of the loan I got.

Unfortunately, I didn’t do this. End result: I had to pay for a portion of the taxes with a credit card just to get my plates. (This is one of the “two steps back” I alluded to in Getting Out of Debt Not Always Straightforward.)

Either way, if you are buying a used car and financing it through a bank or other lending institution, I strongly recommend you find out what your sales tax rate is first. Depending on your city, you may owe a much bigger chunk of money than you expected.

And if you’re thinking of buying a used car and also planning to move in the near future, you might consider two things:

• Move to a place that has a lower sales tax rate.
• Postpone your car purchase until after you have moved.

Tax debt relief is rare, but is sometimes awarded to individuals who’ve overextended themselves and are unable to pay their taxes by the time they are due.

Unfortunately, getting Uncle Sam to cut you a break is not easy. That’s because all the laws are written to favor the federal government.

Sure, the government provides bankruptcy laws. But going through bankruptcy does NOT discharge your tax obligations!

In other words, the government will forgive your debts to others, but will not forgive the tax debts you owe to them.

If you think this is a hypocritical double-standard, you’d be right. Nevertheless, it’s just the way it is, and we have to play by the rules our legislators make.

Tax Installment Plan

The most common kind of relief the government will offer you is some kind of installment plan. They may allow you to make four or five equal payments over four or five months. Or they may spread out your payments over 60 months.

Every situation is unique. Different terms are offered to different people.

If you have a huge tax obligation, an installment plan will at least break down the payments so they are somewhat more manageable (although certainly no less painful).

Offer in Compromise

Although it is extremely rare, the IRS may offer you what’s called an Offer in Compromise. This is basically the same thing as settling a debt.

If you owed $20,000, the IRS may evaluate your situation and decide you will never be able to repay that tax debt. And so they may allow you to make a single lump sum payment for less than what you owe.

By making this reduced lump sum payment, the IRS then agrees to wipe out the entire tax debt.

In a perfect world, an Offer in Compromise would be more common. But the federal government is quite greedy, so this kind of settlement is very rare.

How to Seek Tax Debt Relief

Anytime you face a tax obligation that you cannot pay, then your best course of action is to contact the IRS and talk to somebody. Do not try to hide from the IRS; be transparent with them.

Many times you will be able to negotiate some kind of installment plan. In fact, there are four different kinds of installment plans depending on how much you owe and your past history of filing your taxes.

You can find out what you qualify for by searching the IRS web site or calling an IRS agent directly.

If you are facing a genuine hardship involving a disabled child or insurmountable medical bills, the IRS may be willing to forgive a portion of your debt through an Offer in Compromise.

But in order to see if you qualify for such an offer, the IRS would need to thoroughly evaluate your financial situation.

Remember: Tax debt relief comes in many forms. Don’t procrastinate and try to hide from the IRS. Call them and work something out. You will feel less stress and you’ll be happier when you resolve your tax debt as quickly as possible.

Those were the words of a disgruntled reader who recently unsubscribed from my email list. Coincidentally (or not), he unsubscribed right after I published my post about becoming “Instantly Debt Free.”

I wonder which part he didn’t like: the part about forgiveness of debts or the part about getting rid of the income tax?

Who wouldn’t want their debts to be forgiven?

Who wouldn’t appreciate an increase in cash flow because of no longer paying the income tax?

Oh, well. Some people are weird. They just love getting screwed over by greedy credit card execs and power-hungry politicians.

And some people just like to rob certain classes of people through the tax code so they can give it away to others who they feel are more deserving — and, of course, take their cut as the middle man.

I’m not for any of it.

And if somebody is offended by the ideas of debt forgiveness or living in a country where there is no income tax… then this is definitely not the blog for them to be reading.

Offended? Vindicated? Leave a comment and make yourself heard.

In January of last year, I let everybody know that I owed the government more than $10,000. At the end of that post, I specifically made a note to “Plan better to pay my taxes in 2009″ and “Always trust God, no matter what.”

I had written the first note in particular because last year I had no money to pay my taxes. I wrote the second note because it was God’s miraculous provision that helped me pay my obligations by the deadlines.

So: How did I do on “planning better?”

Well, since I owed about $10K last year, I saved a lot of money this year. I figured $12K would cover it. But to be safe, I saved about $20,000.

In mid-December, I was shocked to discover that my tax bill is approximately $21,000. Whoa. That caused my heart rate to rise!

Fortunately, I only have to pay about $15,000 by January 15. I can postpone the remainder for a couple months.

I was really hoping that I’d have some money left over to pay off more debt. But, no. Such will not be the case.

On the bright side, I do have the money to pay my taxes, so my stress levels are still in check. :-)

Over Christmas, I joked with my wife: “Well, technically we don’t have any money at all since we owe it all to the government. But at least you can enjoy that rich feeling for a little bit longer.”

So my NEW note to myself for this coming year is this:

• Estimate tax obligations every quarter and save accordingly.

This way I won’t be making assumptions about how much (or how little) I owe the government — and hopefully there won’t be any nasty surprises when taxes are due.

The last couple of weeks have been very emotionally exhausting.

Let me tell you why…

First of all, the house we’re renting had a kitchen faucet leak for a couple months. We hired a plumber to fix it in June. The fix only last for two weeks. Then the leak returned.

We’re not talking an annoying “oh, I’m losing water” leak. We’re talking about a “clear out everything under the sink and mop up the half-bucket of water” leak.

It was frustrating to say the least.

The trouble is my landlord is really a homeowner who rented out his home. Since he lives in another state, it’s difficult to get things fixed. He usually asks me if I’ll do the fix myself.

In this case, I finally did.

I bought a new faucet from The Home Depot, got some new plumbing tools, and asked my brother to come over to help.

A couple hours later, we had pulled out the old faucet and put in the new one.

Fortunately, colder weather is setting in. Because a couple of the sprinkler heads aren’t functioning properly either. And I don’t really want to mess with it.

The point: Logically, it makes sense to continue renting; emotionally, I’m ready to be a homeowner again.

So my wife and I have been seriously looking at buying a home.

We found one last Friday and made an offer on it. We’ve gone back and forth a few times, but haven’t agreed on price yet.

Who knows. We may walk away from the deal and see what happens.

Anyway, as I talked with my wife yesterday (our 9th Anniversary!), I mentioned why it might make sense for us to use our funds to pay off debt and continue renting until 2009.

1. If we pay off debt, our credit score will rise, hopefully giving us a lower interest rate on our mortgage.

2. By paying off debt, we could increase our monthly cash flow by $500 to $750 a month by 2009. (Which makes buying a home easier on the pocketbook.)

3. Since I’m self-employed, I will have a new tax return I can use to get qualified for a mortgage. Since my income is up this year, we will be able to extend our home search to homes that are slightly more expensive. (Right now, I’m qualified for a mortgage based on my 2007 tax return.)

4. By waiting until January to buy a home, I’ll be able to pay my 2008 taxes without worrying about a larger home payment. (I have to pay taxes by January 15; usually about $12,000 or more.)

So that’s the story.

I really want to move out and buy a home. I’d love to be in a place where I knew I wasn’t going to have to move in a few months. A place that actually feels like home. (My current house doesn’t feel like home; it feels like my landlord’s home.)

On the other hand, there are some clear benefits of waiting. Possibly better selection and lower prices. (November and December of 2007 saw some of the biggest drops in home prices and sales volume.)

If you were in my shoes, what would you do?