In last week’s blog, “The Secret Sauce to Tax Resolution – RCP” linked here, https://activerain.com/blogsview/5329707/norwalk–ct–the-secret-sauce-of-tax-resolution—-rcp- I gave an overview of how the IRS determines the dollar amount of delinquent taxes that a taxpayer can repay.
Over the next several weeks I will go further into detail on the mechanics of this process.
This week I am going to write about what the IRS considers to be a taxpayer’s “allowable expenses” in making this determination.
My firm, By The Book Taxes, located in Norwalk, CT., specializes in income tax preparation and tax resolution services.
The IRS uses statistics on cost of living expenses gathered by the Department of Labor.
These costs can vary greatly depending upon which region of the country you live in and whether you are in an urban or rural area. The chart below illustrates the types of living expenses that the IRS considers and whether they apply the taxpayer’s actual expenses, a local standard or a national standard in determining how much in monthly payments a taxpayer can afford to repay. This chart is from Eric L. Green’s book entitled, “The Accountant’s Guide to Resolving Tax Debts”, pages 24 and 25.
|Expense||Actual Or Allowable|
|Housing & Utilities||Lesser of Actual or Local Standard|
|Automobile Ownership||Lesser of Actual or National Standard|
|Automobile Operating||Local Standard|
|Public Transportation||National Standard|
|Out of Pocket Health Care Costs||Higher of Actual Or National Standard|
|Court Ordered Payments||Actual|
|Child/dependent care||Actual (must be necessary)|
|Life Insurance||Actual (must be reasonable)|
|Current Year Taxes||Actual FIT/SIT/FICA/SE/Local|
|Delinquent State Taxes||% of State vs. Federal Debt|
If you have years of unfiled tax returns or have tax debts that need to be resolved, please call me, I can help.