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.
“Darrell Issa, This Generation’s Joe McCarthy”
In my most recent blog, I discuss the comments made by Lois Lerner, head of the IRS Tax-Exempt and Government Entities Division. Ms. Lerner commented on the IRS and tax exemption status of social welfare groups at the May ABA Tax Section meeting. These comments sparked the attention of Darrell Issa, chairman of the House subcommittee on Oversight and Government Reform.
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