How the IRS Calculates a Taxpayer’s “Ability to Pay”
12 / 08 / 22

Episode 17: How the IRS Calculates a Taxpayer’s “Ability to Pay”

How does the IRS calculate your ability to pay?

Your ability to pay is something you need to understand when you’re trying to resolve your IRS tax liability.

Your ability to pay is one of two factors the IRS uses to determine how to resolve your case and it’s calculated based on your income and expenses. That might sound simple enough, but creating an accurate representation of your income and expenses can be a lot more complicated than it seems.

In this episode, we’re getting into the nitty gritty of calculating your ability to pay, including what to look out for and how to avoid paying more than you can afford. If you have a tax problem, this is going to help you.

Topics We Cover in This Episode:

  • How to avoid being taken advantage of
  • How your ability to pay is determined
  • Calculating your monthly income
  • What the IRS does to audit and verify the information you send them
  • Avoiding getting stuck in a payment plan you can’t afford
  • Why you want your income to be low and expenses to be high
  • The importance of understanding the IRS collection financial standards
  • Taking the past and the future into account
  • Expenses that can’t be included

Be careful and be accurate. When you complete the forms to prove your ability to pay, you do have to sign them under penalty of perjury. We hope this episode answers your questions about your ability to pay and brings you one step closer to resolving your tax liability.

If you owe the IRS and you want help figuring out what your ability to pay looks like, contact us. We are here to help and ready to answer your questions.

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