June 24, 2015

Denver Tax Attorney   What Are IRS Allowable Living Expenses?The IRS is prohibited from collecting assets an individual needs to meet their basic living requirements. Coined as “Allowable Living Expenses,” these are excluded from the calculation used by collection agents to determine how much a taxpayer’s reasonable collection potential is. Simply put, the IRS will always allow a taxpayer to keep enough cash to afford their allowable living expenses, regardless of their liability to the IRS.

The IRS makes use of Allowable Living Expense National Standards established by the Consumer Expenditure Survey of the Bureau of Labor Statistics in order to help create reasonable repayment structures for delinquent taxes.

The National Standards have essentially been determined for five basic and necessary expenses. These are food, apparel and services, housekeeping supplies, personal care products and services, and a miscellaneous allowance.

The figures below are on a per monthly basis.

Food

Food refers to the total expense for food at home and away from home. This includes food purchased from grocery stores and from fast food chains, full-service restaurants, and take-out. This includes all meals and snacks, as well as money used for tips.

For food, the National Standard is $315 for one person, $588 for two persons, $660 for three persons, and $821 for four persons.

Apparel and Services

Apparel and services refers to all forms of clothing and footwear. It also includes all materials and patterns used to make clothes, repairs and alterations. Clothing storage, clothing rental, dry-cleaning, jewelry, watches, and repairs to these accessories are also covered by this category.

For apparel and services, the National Standard is $88 for one person, $162 for two persons, $209 for three persons, and $244 for four persons.

Housekeeping Supplies

Housekeeping supplies refers to cleaning and laundry supplies, paper napkins and towels, lawn and garden supplies, various household products, postage and stationery supplies, and delivery services.

For housekeeping supplies, the National Standard is $32 for one person, $66 for two persons, $65 for three persons, and $78 for four persons.

Personal Care Products and Services

Personal care products and services refers to oral hygiene products, hair care products, cosmetics, perfume, bath products, shaving products, deodorant, feminine hygiene products, electric appliances for personal care, and any other products used for personal care. This also includes haircuts, beautician services, and repair of personal care appliances.

For personal care products and services, the National Standard is $34 for one person, $61 for two persons, $64 for three persons, and $70 for four persons.

Miscellaneous Allowance

A miscellaneous allowance is for any expenses incurred by taxpayers that are not covered by the four above-mentioned allowable living expenses. It may also be used for any percentage of expenses exceeding Collection Financial Standards not allowed under a deviation. Taxpayers may also opt to use this miscellaneous allowance for credit card payments, school supplies, reading material, bank fees and charges, and other expenses.

For miscellaneous allowance, the National Standard is $116 for one person, $215 for two persons, $251 for three persons, and $300 for four persons.

More on National Standards

Taxpayers are entitled to the amount of monthly National Standards corresponding to the size of their family, and will not be questioned on the amount actually being spent.

For families comprised of more than four persons, an amount of $378 is added for each additional person. The standard amounts change periodically, so it is always best to check with the IRS for the latest figures.

If the amount being claimed is higher than what is allowed by the National Standards for food, apparel and services, housekeeping supplies, and personal care products and services, then the taxpayer must be able to provide appropriate documentation showing that the expenses are indeed necessary living expenses.

 Allowances for such as transportation, housing, utilities and other similar expenses are known as Local Standards. These vary according to location.

 

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