Norwalk, CT: What are "allowable living expenses" to the IRS?

Education & Training with By The Book Taxes 00114257-EA

In last week’s blog, “The Secret Sauce to Tax Resolution – RCP” linked here, I gave an overview of how the IRS determines the dollar amount of delinquent taxes that a taxpayer can repay.


Over the next several weeks I will go further into detail on the mechanics of this process.

This week I am going to write about what the IRS considers to be a taxpayer’s “allowable expenses” in making this determination.


My firm, By The Book Taxes, located in Norwalk, CT., specializes in income tax preparation and tax resolution services.


The IRS uses statistics on cost of living expenses gathered by the Department of Labor.

These costs can vary greatly depending upon which region of the country you live in and whether you are in an urban or rural area. The chart below illustrates the types of living expenses that the IRS considers and whether they apply the taxpayer’s actual expenses, a local standard or a national standard in determining how much in monthly payments a taxpayer can afford to repay. This chart is from Eric L. Green’s book entitled, “The Accountant’s Guide to Resolving Tax Debts”, pages 24 and 25.



Actual Or Allowable



National Standard

Housing & Utilities

Lesser of Actual or Local Standard

Automobile Ownership

Lesser of Actual or National Standard

Automobile Operating

Local Standard

Public Transportation

National Standard

Health Insurance


Out of Pocket Health Care Costs

Higher of Actual Or National Standard

Court Ordered Payments


Child/dependent care

Actual (must be necessary)

Life Insurance

Actual (must be reasonable)

Current Year Taxes

Actual FIT/SIT/FICA/SE/Local

Secured Debts


Delinquent State Taxes

% of State vs. Federal Debt


If you have years of unfiled tax returns or have tax debts that need to be resolved, please call me, I can help.


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