Recently the IRS made some long overdue changes to the National Standards, which they use to determine taxpayers’ ability to pay delinquent tax debts. I say long overdue because the IRS has been using the same standards since February 1, 2006, and because the changes really were necessary.
I am very pleased with two of the changes in particular, the health care and transportation allowances. In the past at JK Harris, we have included $50 for out-of-pocket health care expenses in our clients’ allowable living expenses. It allowed for everyday things like Band-Aids, aspirin, cold medicine, etc.
Now, however, the IRS has added a category for out-of-pocket health care expenses. Taxpayers under the age of 65 can add $54 of out-of-pocket expenses, while those 65 and older can add $144. These dollar amounts are in addition to what the taxpayer is already paying for health insurance and medical bills.
The transportation expenses have changed as well. The IRS is now giving equal value of ownership costs for a taxpayer’s first and second car. They also added an allowance for public transportation while removing the allowance for the no car standard.
So now a taxpayer can earn credit for owning and driving his or her car, as well as for public transportation, if it applies. For instance, a taxpayer may drive his or her car from home to a maybe a train or subway, and use that public transportation the rest of the way to work.
These changes may seem minor, but it shows us that the IRS is heading in the right direction when it comes to giving taxpayers a fair shake.
Other changes to the standards included eliminating income ranges for food clothing and other items; eliminating separate tables for Alaska and Hawaii; expanding the number of household categories for housing and utilities; adding an allowance for cell phones in housing and utilities; and eliminating some of the Metropolitan Statistical Areas for vehicle operating costs.
For more information about the changes to the Allowable Living Expense Standards, visit http://www.irs.gov/newsroom/article/0,,id=174516,00.html.