Collection Financial Standards - Overview
Disclaimer: IRS Collection Financial Standards are
intended for use in calculating repayment of delinquent taxes. These
Standards are effective on April 1, 2013 for purposes of federal
tax administration only. Expense information for use in bankruptcy
calculations can be found on the website for the U.
S. Trustee Program
We have added links below for all of the standards to enable
you to download a PDF version for printing. Please note that the
standards change, so if you elect to print them, check back periodically
to assure you have the latest version.
Collection Financial Standards are used to help determine a
taxpayer's ability to pay a delinquent tax liability. Allowable
living expenses include those expenses that meet the necessary expense
test. The necessary expense test is defined as expenses that
are necessary to provide for a taxpayer’s (and his or her family's)
health and welfare and/or production of income.
National Standards for food, clothing and other items apply
nationwide. Taxpayers are allowed the total National
Standards amount for their family size, without questioning the amount
National Standards have also been established for minimum allowances
for out-of-pocket health care expenses. Taxpayers and their
dependents are allowed the standard amount on a per person basis,
without questioning the amount actually spent.
Maximum allowances for housing and utilities and transportation,
known as the Local Standards, vary by location. In most
cases, the taxpayer is allowed the amount actually spent, or the local
standard, whichever is less.
Generally, the total number of persons allowed for necessary living
expenses should be the same as those allowed as exemptions on the
taxpayer’s most recent year income tax return.
If the IRS determines that the facts and circumstances of a
taxpayer’s situation indicate that using the standards is inadequate
to provide for basic living expenses, we may allow for actual expenses. However,
taxpayers must provide documentation that supports a determination that
using national and local expense standards leaves them an inadequate
means of providing for basic living expenses.
National Standards: Food, Clothing and Other Items
Standards have been established for five necessary expenses:
food, housekeeping supplies, apparel and services, personal care
products and services, and miscellaneous.
The National Standard for Food, Clothing and Other Items includes an
amount for miscellaneous expenses. This miscellaneous allowance is
for expenses taxpayers may incur that are not included in any other
allowable living expense items, or for any portion of expenses that
exceed the Collection Financial Standards and are not allowed under a
The standards are derived from the Bureau of Labor Statistics (BLS)
Consumer Expenditure Survey (CES). The survey collects information
from the Nation's households and families on their buying habits
(expenditures), income and household characteristics.
Additional information and the standard amounts are available on our National
Standards for Food, Clothing and Other Items web page. You may also download
the standards in PDF format for printing.
National Standards: Out-of-Pocket Health Care Expenses
Health Care standards have been established for out-of-pocket health
care expenses including medical services, prescription drugs, and
medical supplies (e.g. eyeglasses, contact lenses, etc.).
The table for health care allowances is based on Medical Expenditure
Panel Survey data and uses an average amount per person for taxpayers
and their dependents under 65 and those individuals that are 65 and
The out-of-pocket health care standard amount is allowed in addition
to the amount taxpayers pay for health insurance.
You may also download
the standards in PDF format for printing. Additional information and
the standard amounts are available on our Out-of-Pocket
Health Care Standards web page.
Local Standards: Housing and Utilities
and utilities standards are derived from U.S. Census Bureau,
American Community Survey and BLS data, and are provided by state down
to the county level. The standard for a particular county and
family size includes both housing and utilities allowed for a
taxpayer’s primary place of residence. Housing and utilities standards
are also provided for Puerto Rico.
Housing and Utilities standards include mortgage or rent, property
taxes, interest, insurance, maintenance, repairs, gas, electric, water,
heating oil, garbage collection, residential telephone service, cell
phone service, cable television, and internet service. The tables
include five categories for one, two, three, four, and five or more
persons in a household.
Additional information and the standard amounts are available by
state or territory on our Housing
and Utilities Standards web page. You may also download
the standards in PDF format for printing. Please be advised that the
housing and utilities document is 47 printed pages
Local Standards: Transportation
standards for taxpayers with a vehicle consist of two parts:
nationwide figures for monthly loan or lease payments referred to as
ownership costs, and additional amounts for monthly operating costs
broken down by Census Region and Metropolitan Statistical Area (MSA).
A conversion chart has been provided with the standards that lists the
states that comprise each Census Region, as well as the counties and
cities included in each MSA. The ownership cost portion of
the transportation standard, although it applies nationwide, is still
considered part of the Local Standards.
The ownership costs provide maximum allowances for the lease or
purchase of up to two automobiles if allowed as a necessary
expense. A single taxpayer is normally allowed one
The operating costs include maintenance, repairs, insurance, fuel,
registrations, licenses, inspections, parking and tolls.
If a taxpayer has a car payment, the allowable ownership cost added
to the allowable operating cost equals the allowable transportation
a taxpayer has a car, but no car payment, only the operating costs
portion of the transportation standard is used to figure the allowable
transportation expense. In both of these cases, the
taxpayer is allowed the amount actually spent, or the standard,
whichever is less.
There is a single nationwide allowance for public transportation
based on BLS expenditure data for mass transit fares for a train, bus,
taxi, ferry, etc. Taxpayers with no vehicle are allowed the
standard, per household, without questioning the amount actually spent.
If a taxpayer owns a vehicle and uses public transportation, expenses
may be allowed for both, provided they are needed for the health, and
welfare of the taxpayer or family, or for the production of income.
However, the expenses allowed would be actual expenses incurred for
ownership costs, operating costs and public transportation, or the
standard amounts, whichever is less.
Additional information and the standard amounts are available on our Transportation
Standards web page. You may also download
the standards in PDF format for printing.
Six Year Rule for Repayment of Tax Liability
The Collection Financial Standards are used in cases requiring
financial analysis to determine a taxpayer's ability to pay. The
vast majority of installment agreements secured by Collection employees
are streamlined agreements, which require little or no financial
analysis and no substantiation of expenses.
In cases where taxpayers cannot full pay and do not meet the criteria
for a streamlined agreement, they may still qualify for the six-year
rule. The timeframe for this rule was increased in 2012 from five
years to six years.
The six-year rule allows for payment of living expenses that exceed
the Collection Financial Standards, and allows for other expenses, such
as minimum payments on student loans or credit cards, as long as the tax
liability, including penalty and interest, can be full paid in six
Taxpayers are required to provide financial information in these
cases, but do not have to provide substantiation of reasonable expenses.
April 1, 2013
There were no changes to the methodology for calculating the
Collection Financial Standards for 2013.
The revised standards are effective for financial analysis conducted
on or after April 1, 2013.
Housing and utilities standards are no longer provided for the
territories of American Samoa, Guam, Northern Mariana Islands or Virgin
Above Per IRS Website 20140106