Key Takeaways
- So there’s a calculation and there’s a formula the IRS uses.
- The IRS is a lot like the post office.
- So the IRS is looking at your income.
So there’s a calculation and there’s a formula the IRS uses. The IRS is a lot like the post office. They have procedures and they have formulas and they have ways that they do things so with respect to how much they’re going to ask you to pay, what they look at is, assuming that you don’t have enough to pay them in full, that you just don’t have the cash sitting in your bank account. Then they’ll look at a payment plan and the payment plan is based on how much income you’re earning and what the IRS considers to be ordinary and necessary expenses so if you pull out an IRS financial statement, you can look at the expenses and the expenses are things like food and clothing and transportation cost and a couple of other different things. So the IRS is looking at your income. They’re subtracting out what they consider to be necessary expenses, not luxuries, and then they come up with a residual and if you run that calculation and you get to your residual then you’ll understand how much they’re going to request. Keep in mind the residual that you’re showing based on that limited analysis is what the government’s going to work out. Not to say that you’re going to have to pay that amount but it’s at least a good starting point for figuring out how much the IRS is going to ask you for at the outset of this.
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