Ability to Pay

IRS Definition

The IRS looks at the taxpayer’s income and assets to make a determination on his or her ability to pay.

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From the IRS perspective, your ability to pay is the amount you can pay toward your tax balance. The IRS uses specific calculations to determine this amount for some types of IRS payment plans, called installment agreements. The IRS determines your ability to pay using the financial statement you provide, listing all your assets (home, cars, bank accounts, etc.), income, and expenses.

If you owe taxes and don’t qualify for a simple payment plan, or if you don’t think you can make any payments toward your tax balance, the IRS will calculate your ability to pay.

Learn all the options you may have if you can’t pay your taxes.

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