Taxpayers with back tax debt, who want tax relief by trying to get a reduction in one form or another, often have tax relief denied due to the fact that they are living beyond their means. If a taxpayer were able to spend every dime of income, without paying any taxes, it would be impossible for the IRS to collect any tax, as every taxpayer would spend every dime, have a great lifestyle, and never owe taxes. That is not the reality we live in.
The IRS has National Standards for certain expenses, and if you go over that amount, the IRS will want the difference paid to them, or calculated into certain tax relief options available for dealing with back tax debts. For example, if you pay $2500 for housing, and the IRS only allows $1500 for your situation and where you live, the difference of $1000 will be calculated into your ability to pay the IRS. This may hamper certain tax relief options you would otherwise qualify for, and because the IRS wants a payment plan that is well beyond your ability to pay.
The National Standards for collection are broken down into categories. Food, clothing, out of pocket health care costs, housing and utilities, and transportation all make up a portion of the different expenses. The National Standard for food, clothing, and other items, includes a miscellaneous category also.
The housing and utilities expenses are determined by looking at U.S. Census Bureau information, and certain survey information. The standards are broken down by county and family size, as larger families need larger housing space.
So what happens if you go over a National Standard? It is crucial in these situations that you know every option available for dealing with a tax debt; otherwise you may end up in a situation with the IRS that is bound to fail. If a payment plan is worked out that cannot be kept in the long term, other options must be determined to make the plan a long term workable plan. It is crucial to have a Seasoned Tax Professional to help guide you through the maze of options, to make the correct choice, one that will work out in the long haul.
The IRS Collection Standards page can be located at: irs.gov/individuals/article/0,,id=96543,00.html