The Internal Revenue Service (IRS) uses a set of household expense estimates known as the Collection Financial Standards (CFSs), when determining payment amounts for delinquent taxes. CFSs include four categories: housing and utility expenses; food, clothing and other items; transportation and health care. Certain CFS categories follow national standards, while others use only local estimates or a combination of both. The IRS bases CFS estimates on data compiled by sources such as the United States Bureau of Labor Statistics and the United States Census Bureau.
Housing and Utilities
IRS housing and utility estimates follow local standards, based on the cost of living in individual counties and household size. Within housing and utility standards, the IRS includes the total cost of housing, such as: rent or mortgage payments; insurance; property taxes and utility costs, such as telephone, water, electricity and maintenance costs. Housing and utility standards can vary widely, depending on location. For example, as of the time of publication, the IRS allows a monthly housing and utility standard of $999 for a family of four in Wilcox County, Alabama and a standard of $2,917 for a family of four in San Francisco County, California.
Food, Clothing and Other Items
Within the Food, Clothing and Other Items category, the IRS uses national standards, based on family size. For example, as of the time of publication, the IRS estimates the monthly cost of food for one person at $300 and $757 for a family of four. Food expenses can include groceries for cooking at home and meals from restaurants. The category also includes housekeeping supplies, which can include lawn supplies, laundry supplies and house cleaning products. Personal care expenses in the category can include hair care products, cosmetics and shaving products. Clothing costs can include the expense of buying apparel; accessories, such as watches and jewelry and clothing care, such as dry cleaning. The Food, Clothing and Other Items category also allows for unspecified expenses, allowing a four-person household $235 for miscellaneous costs.
The IRS estimates the cost of out-of-pocket health care expenses based on national standards for different age groups. Out-of-pocket health care costs can include necessary items and services, such as eyeglasses, prescription medications or regular dental checkups. The IRS CFS for health care estimates costs for people under 65 year of age and allows higher expenses for senior citizens 65 years old and older.
The IRS uses national standards for certain types of transportation costs and local standards for others. The CFS for automobile ownership uses national estimates for the cost of lease or car loan payments, allowing $496 per month for owners of one car and $992 for owners of two cars, as of the time of publication. The IRS uses local and regional standards to establish automobile operating costs, which can include fuel, insurance, parking fees and repairs. For example, the IRS estimates the expense of operating one car in Seattle, Washington at $192 per month, but allows Miami car owners $346 for one car. The IRS uses a national standard of $182 per month per person for public transportation expenses, which may include fares for ferries, buses, trains or taxis.
- IRS.gov: Collection Financial Standards
- IRS.gov: National Standards: Food, Clothing and Other Items
- IRS.gov: Alabama -- Local Standards: Housing and Utilities
- IRS.gov: California -- Local Standards: Housing and Utilities
- IRS.gov: National Standards: Out-of-Pocket Health Care
- IRS.gov: Local Standards: Transportation