After months of using three-year-old data to calculate taxpayers living expense standards, the IRS has finally issued new standards. These standards, also known as collection financial standards, are used when reviewing a taxpayer's account to determine their ability to pay federal tax liabilities. Essentially the IRS uses this data to determine the type and amount of tax debt relief each taxpayer qualifies for during settlement negotiations. The new standards went into effect October 1.
According to an IRS news release the standards have been designed to incorporate the following items:
- A new category for out of pocket health care expenses
- The elimination of income ranges for national standards for food, clothing and other items
- A nationwide set of tables for national standard expenses, eliminating separate tables for Alask and Hawaii
- An expanded number of household categories for housing and utilities
- An allowance for cell phone costs in housing and utilities
- Equal allowances for first and second vehicles under transportation expenses
- Fewer Metropolitan Statistical Areas for vehicle operating costs
- A separate nationwide public transportation allowance
A little over a month ago I drafted an open letter to the Secretary of the Treasury urging for changes to the IRS standards as they had not been updated since last year. I am glad to see the IRS has finally decided to update these standards as using three-year-old data to calculate a person’s expense standards was making things unnecessarily difficult on taxpayers hoping to find IRS tax relief.
