Continued from IRS Allowable Living Expenses – Part One
Collections
IRS Allowable Living Expenses – Part One
Although a favorite saying of IRS revenue officers is that “The IRS is not a bank” and the Service does take collection of taxes owed seriously, the IRS is prevented from collecting assets that a person needs to survive and meet their basic living requirements. The IRS calls these “Allowable Living Expenses” and they are excluded from the calculation that collection agents use to determine a taxpayer’s reasonable collection potential. Keep in mind that regardless of the size of the liability, whether one thousand or one million dollars, the IRS will always allow the taxpayer to keep enough cash to pay for their allowable living expenses.
Key Takeaways
- Although a favorite saying of IRS revenue officers is that “The IRS is not a bank” and the Service does take collection of taxes owed seriously, the IRS is prevented from collecting assets that a person needs to survive and meet their basic living requirements.
- So what does the IRS consider allowable living expenses? The IRS has developed a test called the necessary expense test to determine whether or not it will allow an expense to be included.
- 3. Other Conditional Expenses – expenses, which may not meet the necessary expense test, but may be allowable based on the circumstances of an individual case.
How to Deal With an IRS Bank Levy – Part One
When you owe a balance due to the IRS and fail to resolve that balance in a timely manner through one of the approved resolution methods, the IRS takes increasing stern action to try and force compliance on your part. One of these avenues is though an IRS bank levy. An IRS levy is defined as “a legal seizure of your property to satisfy a tax debt.”[1] In the case of an IRS bank levy, the IRS takes money from your checking or savings account in order to satisfy your outstanding tax liability. Although the IRS is required to send notice of its intent to levy under statute, it usually does not tell you when it plans to seize money out of your checking account. Sometimes this puts taxpayers in a precarious position because they count on funds being in these accounts that are no longer available due to the IRS levy.
Key Takeaways
- When you owe a balance due to the IRS and fail to resolve that balance in a timely manner through one of the approved resolution methods, the IRS takes increasing stern action to try and force compliance on your part.
- The IRS bank levy process is initiated by a notice sent from the IRS to the bank that is holding your assets.