If you owe money to IRS which is the seemingly biggest collection agency and in some circles also known as known as Uncle Sam then most of the time I can tell you it becomes virtually impossible to pay the Debt in full. Not only that, but you want to avoid an IRS tax audit at all costs, as a tax audit can be frightening. However, no need to worry if you are one of those people who are unable to pay the amount due in full, the catch is that like many other collection agencies which in similar case offer installment plans. IRS too will give you the option if you will not be able to pay your amount in full then you can have a payment plan for your outstanding debt. As there are not many options in hand except entering into a payment plan, there are a few things that you should keep in mind or things which might entail any such plan.
Determination of Minimum Payment Amount:
Regrettably, the choice is not yours in selection of a minimum payment plan. As you work with some financial institution while taking loans or similar products here it’s not up to you to decide what would be more beneficial for you. The IRS will be the one who will be making the decision how much would be your minimum payment plan. Why its not going to be an easy phase cause you will have to give what’s called “ A Full Financial Disclosure” Here you will have to provide each and every detail of your businesses. That means giving details of where the money is coming from, how you live and based on these the IRS will calculate how much is your allowable monthly expense. Once the allowable monthly expense has been calculated rest every penny will go to them for the payment of debt.
Now you might think well that is good for me. Because of the fact that I am going to take care of all the expense. Well what you might consider as an expense IRS might disagree. A very simple example of this is that you might be making a couple of payments towards credit card debt and this would be one of the biggest expenses that you make on monthly bases. On the contrary IRS does not consider Credit Card payment as your Allowable Expense rather it considers all the payments that you make towards Credit Cards as Luxuries and will not account that as “Allowable Expenses” no matter how many or how much payments you’re making towards your Credit Cards.
You might be confused some money that you spend should be considered as allowable expense then you have to prove to the IRS that the subject expense is absolutely necessary. Then the IRS after careful analysis will make a decision to consider that as allowable expense or not.
The interest and penalties that you have will keep on consolidating and if the payments that you are making aren’t substantial then you might not even see any difference in the Debt Balance. Infect in most of the cases where the amount of payment after the allowable expenses deduction is too low, the debt keep on increasing month after month, year after year.
Irony is that if you manage to make more money, get another job or a business then IRS will know about it. Which will entail that more money will go into the pockets of IRS instead of coming into yours.
