Retired Debt

If a taxpayer has a debt for an allowable expense, which will be paid off in a relatively short period of time, the IRS may partially disregard the debt when calculating the taxpayer’s long term ability to full pay his or her outstanding Federal tax liability. When calculating a taxpayer’s future ability to full pay their current outstanding Federal tax liability, the IRS will take into account all factors which influence a taxpayer’s future ability to pay on their outstanding Federal tax liability. One such factor deals with fixed liabilities owed by the taxpayer. Specifically, when a taxpayer has a fixed liability, the IRS will take into consideration how much longer the taxpayer will be paying on the debt. Retired debt analysis is an important fact the IRS examines when determining a taxpayer’s reasonable collection potential.