When the Internal Revenue Service analyzes a taxpayer’s ability to pay, they follow certain rules contained in the Internal Revenue Manual. Depending on whether a revenue officer has been assigned to your case, either a form 433-F or 433-A will need to be completed. From the IRS’s perspective, these forms are used to compute the amount of money you can pay them each month. The problem with this approach from the taxpayers perspective, it that the IRS uses certain unrealistic expense standards that do not take into account such items as your child’s sports expenses, vacations, or regional food expenses. Therefore, it takes skill and effort to formulate a plan to “sell” to the IRS of the actual amount that is available to them each month.
Below are the relevant sections are of their manual:
Financial Analysis Handbook — IRM 5.15.1 Excerpts
The relevant IRM excerpt is available on the IRS’s website at http://www.irs.gov/irm/part5/irm_05-015-001.html#d0e1255.
Financial Analysis Handbook — IRM Exhibit 5.15.1-1 – Questions and Answers to Assist in Financial Analysis
The relevant IRM excerpt is available on the IRS’s website at https://www.irs.gov/irm/part5/irm_05-015-001.html#d0e4149.
Financial Analysis – Monthly National Standards: Food, Clothing and Other Items
The IRS Collection Financial Standards — National Standards: Food, Clothing and Other Items, are available on the IRS’s website at https://www.irs.gov/businesses/small-businesses-self-employed/national-standards-food-clothing-and-other-items.
Financial Analysis – Local Standards: Housing and Utilities
The IRS Collection Financial Standards — Local Standards: Housing and Utilities, which are provided on a state-by-state basis down to the county level, are available on the IRS’s website at https://www.irs.gov/businesses/small-businesses-self-employed/local-standards-housing-and-utilities.
Financial Analysis – Local Standards: Transportation
The IRS Collection Financial Standards — Local Standards: Transportation, are available on the IRS’s website at https://www.irs.gov/businesses/small-businesses-self-employed/local-standards-transportation.