IRS Collection Standards

IRS Collection Standards

This firm represents delinquent taxpayers and it is difficult to negotiate with taxing authorities because they must abide by certain numerical guidelines.  Recently, I was struck by an article in a quarterly newsletter of the American Bar Association Section of Taxation (Spring edition).   Jane Zhao, a Public Servicer Fellow and resident of Chicago, attempted to live for one month on the amount allowed by the IRS collection guidelines. These guidelines are used by the IRS to grant taxpayers an allowance for living expenses before setting a repayment schedule. A single individual is entitled to $565 for food, housekeeping supplies, apparel, personal care products and services and miscellaneous products.

Ms. Zhao spent all of her money on food and spent nothing on housekeeping supplies, apparel, personal care products and services and miscellaneous products. Her report reinforces the notion that the poor and middle class struggle to meet basic needs. She observed that a nationwide standard does not take into account the high cost of living in certain areas.

The IRS is not fond of a program that permits taxpayers to avoid paying all of its taxes.  Lee Sheppard of Tax Notes wrote that a tax return is not an opening offer in a negotiation. Despite renewed emphasis on the Offer in Compromise program, there are still substantial amounts outstanding. Perhaps it is time to ask if is the goal to collect all tax owed and encourage compliance or is it to collect whatever tax we can and narrow the deficit.