When a taxpayer requests an installment agreement for larger tax liabilities or proposes an offer in compromise, the IRS applies allowable expense standards. Total allowable 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. The expenses must be reasonable. The total necessary expenses establish the minimum a taxpayer and family needs to live and serve as the basis for granting installment agreements and offers in compromise.
A lottery winner has a ton of tax problems after he was conned by tax scammers. Altough many of the people who scammed a lottery winner are in prison, he still had to pay IRS bills caused by the crooks.