IRS Conditional Expenses- How to pay the IRS and your Debtors

A Conditional Expense is an expense that is not a necessary living expense. A rule of thumb for determining if an expense is this:

If the expense is not necessary for you to live, it's a Conditional Expense.

A Conditional Expense are expenses like credit card bills, additional car payments, money sent to family living overseas, or college/private school tuition. These expenses may seem necessary to the client, but not to the IRS.

The IRS wants to be paid first.
There are Two Rules to look at to determine if the IRS will allow the Conditional Expense(s).

1. One year rule
The one year rule allows you to continue paying for your Conditional Expenses for one year if you meet the Five year Rule (below).

2. Five year rule
The Five Year rule states that you must full pay the IRS before the end of the Collection Statutes Expiration Date (CSED) or before the five year period ends, whichever is shorter. For most, the 5 year period will be shorter.

On Necessary Medical Payments
The IRS National Standard for out-of-pocket Medical Payments is $60.00. You might be paying more than $60.00 for out-of-pocket medical expenses. If you can prove that you must pay more than the National Standard for the well-being of you or a family member, the IRS will be required to allow the expense.

Applying for a Payment Arrangement with Conditional Expenses

The IRS may allow you to pay different amounts for each year of the "five year period" as long the payments add up to the full debt about before the statute of limitations on the debt expires (or before the end of the five year period). The trick will be convincing the IRS to allow the Conditional Expense. If you're having trouble working with the IRS, consider consulting with a professional.