IRS Living Expenses Allowances

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When you are required to submit financial information to the IRS for requesting either an Installment Agreement or Officer in Compromise, the IRS determines the amount that you can pay by taking into consideration living expenses using a set of predetermined living expense allowances which are updated annually.

These allowances do take into consideration the number of people in your household. In addition, for housing, utilities, and transportation costs, they consider your location within the United States. The allowances for other expenses, such as food and clothing, are based on information obtained from the Bureau of Labor Statistics Consumer Expenditure Survey.

The allowances increase for additional people in your household, however, apparently on the theory that “two can live cheaper than one,” the additional amounts are lower than the full allowance for one person (i.e. food for one person is $386, but food for two people is $537, not $685).

You are allowed expenses for the following items:
 

  • Food
  • Housekeeping supplies
  • Apparel
  • Personal care products
  • Miscellaneous expenses
  • Out-of Pocket Health care expenses
  • Housing and Utilities
  • Transportation

If the facts and circumstances of your situation indicate that your situation is more suited to using actual expenses due to the inadequacy of the allowances, they will generally allow actual expenses. For this to happen, you would need to provide documentation showing that using the allowances would leave you with “inadequate means of providing basic living expenses.”

In some cases, it may be possible to get the IRS to agree to allow higher living expenses for one year. The intent would be to allow you time to adjust to lower living expenses.

The rules and regulations regarding IRS allowable living expenses are complicated, but rest assured, TaxAudit’s tax professionals are here to help. We have handled thousands of IRS cases and can deal with the IRS for you as well.

Get started resolving your tax debt with a free consultation from a tax professional.

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