Explaining Your Expenses to the IRS In an Expensive World

"I can’t pay my IRS tax debt because I need to make sure there’s food on my table first.” 

If you’ve found yourself uttering these same words, you’re not alone. Look, groceries have never been higher. Wages have remained stagnant. Every day taxpayers are getting less for more everywhere they look. So, while many taxpayers file their tax returns on time, they often ignore the bill because other, seemingly more important expenses, need to get paid first. 

But when the IRS inevitably sends letters looking to collect, many assume the IRS will understand these dire economic times. Wishful thinking, of course. 

Here’s the deal - If you tell the IRS you’re looking for an alternative to paying your tax bill in full, the folks on the other end of the line are going to look at your expenses through a much different lens. In many cases it means the IRS won’t use the amount you’re actually spending on other stuff to determine your ability to pay your tax bill. Rather, the IRS uses a complex combination of national, regional, local, and actual expenses to come up with the number it will rely on, depending on the type of expense you’re trying to claim. 

For example, you might be spending $3,000 per month on rent for your family of 5, but the IRS may only be willing to recognize two-thirds of that expense. You might also have an $800 car payment (have they seen interest rates these days?), but you might only be entitled to half that. 

Do you have kids in private school? Well, think again. The IRS doesn’t care about how much that tuition costs – sadly, it’s not going to be considered. 

What the IRS is trying to tell you is that before you call the collection line and claim hardship, (or ask for a settlement in the case of an Offer in Compromise), you’re going to have to eliminate expenses they deem as not necessary or excessive. 

If you’re struggling to prove to the IRS that you can’t afford to pay your entire tax bill, leave it to the professionals at Milestone Tax Solutions. Give us a call today at 833-505-4403 to put your worries to bed once and for all.