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Budgeting When Behind in Taxes
The IRS uses "Collection Financial Standards" to help determine a taxpayer's ability to pay a delinquent tax liability. Allowable living expenses include those that meet the test of being necessary to provide for a taxpayer's
(and his or her family's) health and welfare, as well as his or her ability to produce income.
The IRS recently issued the new allowable living standards, effective October 1, 2007. The standards have been redesigned to incorporate items including a new category for out-of-pocket health care expenses and an allowance for cell phones.
Higher costs may be allowed by the IRS if a taxpayer can prove that these amounts are inadequate.
Here are four categories showing the basic amounts allowed by the IRS in calculating delinquent tax payment amounts:
1. Food, Clothing and Miscellaneous Items
National monthly standards have been established for five necessary expenses of food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous items.
| Monthly Expense |
One Person |
Two Persons |
Three Persons |
Four Persons* |
| Food |
$270 |
$511 |
$615 |
$737 |
| Housekeeping supplies |
$28 |
$59 |
$61 |
$72 |
| Apparel/ services |
$85 |
$150 |
$206 |
$239 |
| Personal care products/ services |
$30 |
$53 |
$56 |
$64 |
| Miscellaneous |
$81 |
$152 |
$185 |
$219 |
| Total |
$494 |
$925 |
$1,123 |
$1,331 |
|
* For each additional person, add $246 to the four-person total allowance |
2. Health Care
National out-of-pocket health care standards have been established for out-of-pocket expenses including medical services, prescription drugs, medical supplies, eyeglasses, contact lenses, etc. This monthly amount is allowed per person in addition to what is paid for health insurance.
|
Age |
Monthly Out-of-Pocket Health Costs |
|
Under age 65 |
$54 |
|
65 and older |
$144 |
3. Housing and Utilities
The monthly standards for housing and utilities are determined on a local basis. The amounts allowed for a particular area and family size cover a taxpayer's primary residence. They include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, garbage collection, telephone and cell phone.
As you might expect, the allowances vary widely across the nation. Here are a handful of examples:
|
County |
Monthly Housing / Utilities
Allowance for a Family of 1 |
Housing / Utilities Allowance
for a Family of 5 or more |
| San Francisco County, CA |
$1,984 |
$2,783 |
| Boulder County, CO |
$1,515 |
$2,125 |
| Palm Beach County, FL |
$1,282 |
$1,798 |
| Morgan County, IL |
$ 887 |
$1,244 |
| Forest County, PA |
$ 734 |
$1,030 |
| Harding County, NM |
$ 586 |
$822 |
For a complete listing of areas by state or territory, and family size, click here.
4. Transportation
The transportation allowances for taxpayers with a vehicle consist of two parts: nationwide figures for monthly ownership costs and additional local amounts for monthly operating costs. They are broken down by Census Region and Metropolitan Statistical Area.
There is one nationwide allowance for public transportation for train, bus, taxi, ferry, etc. fares
The vehicle ownership costs provide maximum allowances for lease payments or loan payments for up to two automobiles, if allowed as a necessary expense. A single taxpayer is normally allowed only one automobile.
Operating costs include maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking and tolls.
If a taxpayer has a car payment, the allowable ownership cost added to the allowable operating cost equals the allowable transportation expense. If a taxpayer has a car, but no car payment, only the operating costs portion of the transportation standard is used to figure the allowable transportation expense. In both cases, the taxpayer is allowed the amount actually spent, or the standard, whichever is less.
If a taxpayer owns a vehicle and uses public transportation, expenses may be allowed for both, provided they are needed for the health, and welfare of the taxpayer or family, or for the production of income.
Monthly Transportation Allowances
|
National Public Transportation - Fares $163 |
|
National Vehicle Ownership Costs |
$478 for 1 car |
$956 for 2 cars |
|
Operating Costs by Area |
1 Car |
2 Cars |
Northeast Region including ME, NH, VT MA, RI, CT, PA, NY, NJ,
except the following cities: |
$206 |
$412 |
| Boston |
$209 |
$418 |
| New York |
$268 |
$536 |
| Philadelphia |
$221 |
$442 |
| Pittsburgh |
$172 |
$344 |
Midwest Region including ND, SD, NE, KS, MO, IL, IN, OH, MI, WI, MN, IA,
except the following cities: |
$173 |
$346 |
| Chicago |
$203 |
$406 |
| Cleveland |
$181 |
$362 |
| Detroit |
$248 |
$496 |
| Minneapolis-St. Paul |
$169 |
$338 |
| St. Louis |
$169 |
$338 |
South Region including TX, OK, AK, LO, MS, TN, KY, WV, VA, MD, DC,
DE, NC, SC, GA, FL, AL, except the following cities: |
$181 |
$362 |
| Atlanta |
$198 |
$396 |
| Baltimore |
$186 |
$372 |
| Dallas-Ft. Worth |
$206 |
$412 |
| Houston |
$240 |
$480 |
| Miami |
$236 |
$472 |
| Washington, D.C. |
$208 |
$416 |
West Region including NM, AZ, CO, WY, MT, NV, UT, WA, OR, ID,
CA, AK, HI, except the following cities: |
$194 |
$388 |
| Anchorage |
$185 |
$370 |
| Denver |
$199 |
$398 |
| Honolulu |
$202 |
$404 |
| Los Angeles |
$251 |
$502 |
| Phoenix |
$225 |
$450 |
| Portland |
$170 |
$340 |
| San Diego |
$216 |
$432 |
| San Francisco |
$256 |
$512 |
| Seattle |
$173 |
$346 |
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