Owe a lot in back taxes? Are you nervous that the IRS or the state will take all your money and leave you with nothing for expenses like food, housing, cars, insurance, etc.?

Tax resolution or tax debt settlement can be confusing topics that often seem overwhelming to the person who has a delinquent tax debt. The first thing I like to tell everyone though is that it doesn’t matter where you are in the process, hiding under a rock from the IRS and/or the state or you just recently defaulted on your taxes or just wanting to get rid of this burden. your shoulders relax.

So relax… Did you know that the IRS and/or the state can’t take more money than you can afford? What is the definition of what you can afford? Each taxing authority defines this slightly differently, but the general principles are the same for the IRS and all states. You must be allowed to pay for housing, food, medicine, cars, insurance, etc. These costs are classified as your “allowable living expenses.”

Your income minus your allowable living expenses will give you the amount of money the IRS and/or the state can claim, also known as disposable income. Your goal is to reduce your disposable income to the lowest amount possible, thereby reducing the amount you will have to repay. If you do not have any disposable income, then the IRS and/or the state cannot keep any of your income. The key is: let them know you don’t have any disposable income. Do this by completing the correct forms and using the IRS and/or state payment calculations.

While the amount you owe plays a role in how much you have to pay, it plays a lesser role than what you can afford. The United States has laws and you have rights that protect you from paying more of your delinquent tax debt than you can afford. Again, minimize your disposable income and minimize your refund.

The IRS or the state can also force you to liquidate assets. You generally won’t be asked to sell the family home or family car, but if you own other types of assets (non-owner-occupied real estate, boats, RVs, etc.), the IRS will want the equity in These articles. If you can prove to the IRS that these assets have no equity, you need that asset to work, or you can make monthly payments on your tax bill that will allow you to pay off your balance in full within the allotted time frame. , many times you will be allowed to keep that asset.