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IRS Collection Financial Standards

If you owe a significant amount in back taxes to the IRS and can’t pay within 120 days, you will likely be required to provide some financial information to the Service to resolve your tax liability.  The IRS will use your monthly income and expenses to determine your ability to pay monthly.  If you are an individual with an IRS tax debt, you may be surprised at how much your numbers differ from their numbers.  In most cases that I’ve seen, the IRS comes up with a much higher ability to pay than the taxpayer.

The discrepancy is often due to the implementation of IRS’ Collection Information Standards.  The Standards are used to limit how much money an individual can spend each month on the expenses listed below.
  • Food Clothing and Other Items
  • Out-of-Pocket Health Care Expenses
  • Housing and Utilities
  • Transportation

IRS National Standards

Yes, you read that correctly.  The IRS limits monthly Food and Out-of-pocket Health Care Expenses.  Seems ridiculous, doesn’t it?  Of course, there are circumstances in which the IRS will allow a taxpayer to go over the Standard limits.  To do so, the higher expense typically must provide for the health and welfare of the family or for the production of income.  Be sure to take the IRS Collection Information Standards into consideration when completing your IRS Collection Information Statement (forms 433-F and 433-A), and if possible, use them to your advantage.

If you’ve never completed an IRS Collection Information Statement, the implementing the Collection Information Standards can be confusing. M&M Financial has years of experience completing IRS Collection Information Statements with our clients.  Contact us today to find out how we can help you resolve your tax debt for good.


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