When you cannot pay your tax debt

On Behalf of | Jun 14, 2019 | Back Taxes or Tax Debt

Come tax time, all Connecticut residents hope that they will have the ability to pay their tax bills. Unfortunately, some cannot. Having tax debt is something that can weigh on a person’s mind and pocketbook, as the longer tax debt is carried, the more one will owe in interest and penalties. Something many people may not be aware of is that the Internal Revenue Service has collection standards it must abide by when a person is unable to meet his or her tax liability.

The Collection Financial Standards are broken down into general, national and local categories. When looking at a person’s ability to pay tax debt, the IRS will look at his or her general living expenses. If one’s disposable income after providing for one’s health and overall welfare is insufficient, a repayment plan will need to be created that fits within that individual’s budget.

Maximum allowances given for food, clothing and various other items are determined according to national standards — regardless of how much a person actually spends on these things. Allowable expenses for transportation costs, utilities and housing vary from location to location, so local standards are used to determine one’s permissible living expenses. The IRS provides a detailed list on its website of what it considers eligible expenses when determining a person’s monthly disposable income and ability to repay his or her tax debt.

The good news is, the IRS is willing to and legally has to work with individuals who may lack the funds to pay their tax debt. The bad news, the Collection Financial Standards are not necessarily easy to read or understand, so the average person may not know how to approach the IRS when wanting to work out an affordable repayment plan. When dealing with tax debt, Connecticut residents can turn to an experienced tax law attorney to help them confront the IRS and resolve the matter.