Once you owe taxes to the IRS, they have very specific criteria of what expenses they will allow over the long term when they determine how much they will ask you to pay back per month to repay the debt. To understand the process the IRS uses, it is important to realize they are trying to collect as mush as possible from you, and it does not always matter how much you can afford to pay. From the taxpayers perspective, the goal is to reach a payment plan that from a monetary perspective allows you to live your life in a reasonable manner, and pay down the debt as quickly as possible without incurring unbearable stress.
Overall, the starting point to determine the amount of your monthly income you can pay each month is determined by the IRS by having you complete either a 433-A, 433-B or 433-F form. These forms are used by individual and business taxpayers. Completing these forms can be very tricky since the IRS does not explain their use in a clear fashion, and often if you just fill them out in good faith you will end up paying them a lot more per month than you can afford. When this happens, most people stop paying their current taxes correctly and the tax issue snowballs into a complete mess.
The IRS national standards for food, and misc. expenses, such as clothing are consistent across the country so that presents a practical problem if you live in an area of the country where the living expenses are high (for instance the metro NY area). There has also established national standards for vehicle expenses, out of pocket health care, and housing. For housing expenses, the IRS does refine the calculation to the state and county level, but in many cases that amount is less than the average person spends for housing. Since it is not easy in most cases to change your housing costs, this is an issue that is not easy to solve. If your costs are within the standard amount, the IRS will not question the expenses so you do not need to prove you paid it.
The total number of people in the household will affect the standard amount allowed. To get the benefit of the person being allowed in the standard expense calculation, they would also have to be included on your income tax return that you filed. In some cases, the IRS allows higher costs for one year to allow you time to transition to a lower cost structure for your expenses.
In cases where you owe the IRS less than $50,000, they will often accept a payment plan where the tax debt is paid over sixty months without a complete financial analysis of your account. In cases where you do not meet the streamlined criteria you need to prove your expenses, and even then, they may disallow them and impose their own standard expense. As a tax lawyer, we can add valuable advice on which expenses the IRS will allow and which ones they will not in order to come to an agreement that is affordable to you.