Today TaxMama hears several people who are having problems with the amounts IRS wants paid on their balance due, compared to the amount they think they can pay. In most cases, the amounts due are under $25,000.
My friends, I know that it’s tough, frightening and frustrating to owe IRS a bundle of money. And there’s no doubt that it feels like a huge, overpowering balance due, hovering over your head, ready to land on you like Thor’s hammer.
But it wouldn’t be so bad if you could get it under control.
So my friends, it’s time you learned about IRS’s National Standards for Collections.
These are the numbers IRS uses as the maximum limits on your housing (rent/mortgage payments) allowance, incidental living expenses and transportation costs. They are indexed by geography – so look up your state, and possibly city, if it’s big enough.
Use those numbers to fill in the worksheet on page 6 of the Form 433-A – the form that IRS uses to see how much spendable money you have each month. Read the instructions carefully so you can legitimately maximize the expenses you show. http://www.irs.gov/pub/irs-pdf/f433a.pdf
Once you include the correct numbers on the worksheet on page 6 of Form 433-A, you’ll see how much money you have left over towards the monthly payment – at least in IRS’s eyes.
And if you don’t think you can afford what IRS wants, perhaps it’s time to look at your spending? Are you living beyond your means? What costs can you cut that really aren’t necessary? If your mortgage payments are far more than you can really afford, perhaps it’s time to sell that home?
You’re probably not earning as much as you were, as you expected to be at this point in your life – so your lifestyle really must change to accommodate reality.
You’re at the top of the market right now. Odds are that any profit from the sale won’t be taxable due to the personal residence exclusion. You’ll generate enough cash to get IRS off your back. And perhaps you’ll have money left over to start saving up for another house when the market tanks as more foreclosures come up due to all the negative amortization loans that were written in during the recent real estate boom this century.
And remember, you can find answers to all kinds of questions about tax debt and all kinds of other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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- IRS Form 433-A :: Collections Form
- IRS National Standards Allowable Expenses :: for installment agreements & offers in compromise