Collection Financial Standards
This information is intended as technical
information of use to consultants
and individuals doing research. For information on tax assistance,
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General
Collection Financial Standards are used to help
determine a taxpayer's ability to pay a delinquent tax liability.
Allowances for food, clothing and other items,
known as the National Standards, apply nationwide except for Alaska
and Hawaii, which have their own tables. Taxpayers are allowed
the total National Standards amount for their family size and
income level, without questioning amounts actually spent.
Maximum allowances for housing and utilities and
transportation, known as the Local Standards, vary by location.
Unlike the National Standards, the taxpayer is allowed the amount
actually spent or the standard, whichever is less.
Food, Clothing and Other Items
National
Standards for reasonable amounts have been established for
five necessary expenses: food, housekeeping supplies, apparel
and services, personal care products and services, and miscellaneous.
All standards except miscellaneous are derived
from the Bureau of Labor Statistics (BLS) Consumer Expenditure
Survey (CES). The miscellaneous standard has been established
by the IRS.
Alaska and Hawaii
Due to their unique geographic circumstances and
higher cost of living, separate standards for food, clothing and
other items have been established for Alaska
and Hawaii.
Housing and Utilities
The housing
and utilities standards are derived from Census and BLS data,
and are provided by state down to the county level.
Transportation
The transportation
standards consist of nationwide figures for monthly loan or
lease payments referred to as ownership costs, and additional
amounts for monthly operating costs broken down by Census Region
and Metropolitan Statistical Area (MSA). Public transportation
is included under operating costs. A conversion chart has been
provided with the standards which shows which IRS districts fall
under each Census Region, as well as the counties included in
each MSA. The ownership cost portion of the transportation standard,
although it applies nationwide, is still considered part of the
Local Standards.
The ownership costs provide maximum allowances
for the lease or purchase of up to two automobiles if allowed
as a necessary expense. The operating costs are derived from BLS
data.
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 no car payment,
or no car, only the operating costs portion of the transportation
standard is used to come up with the allowable transportation
expense.
Recent Revisions
The Local Standards for housing and utilities
and transportation were revised on 01/01/02 to:
add family size to the housing and utilities allowances
(two or less, three, and four or more);
base automobile ownership/leasing costs on the five-year average
of new and used car financing data compiled by the Federal Reserve
Board of Governors; and,
reflect updated information from the Bureau of Labor Statistics.
The revised Local Standards for housing and utilities and transportation
are effective for financial analysis conducted on or after January
1, 2002.
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