JK Harris Gives Nod to Proposed Changes to IRS' Standards

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JK Harris likes the proposed changes to IRS National Standards.

The IRS has recently proposed changes to its National and Local Standards for allowable living expenses. And JK Harris and Company is giving those suggested changes a big thumbs up.

The standards are what the IRS uses to determine a taxpayer's ability to pay a delinquent tax liability. The current standards have been in place since February 1, 2006.

"We're hoping they open these changes for public comment," said Kelly Scott, an Enrolled Agent and Director of Training and Customer Service for JK Harris, the nation's largest tax resolution firm. She feels a public forum would give JK Harris representatives a chance to voice their opinions on the proposed changes.

The current National Standards give allowances for food, clothing, housekeeping supplies and personal care products and services nationwide, with the exception of Alaska and Hawaii, which have their own standards. The National Standards are based on family size and gross monthly income, without questioning the amounts that are actually spent.

Scott said she has seen some inconsistencies in the past regarding the standards.

"I've seen cases where the Revenue Officers are using different numbers than the current National Standards," she stated. "That just creates disparity and confusion."

The proposed changes to the National Standards are:

  • Include Alaska and Hawaii in the nationwide standards instead of having their own tables.
  • Eliminate the income ranges for each expense, which means we will now have just one total dollar amount instead of breaking it down into food, clothing, housekeeping, etc.
  • Adopting a new methodology for calculating miscellaneous expenses for additional persons within the household.

The current Local Standards give allowances for housing and utilities and are based on the county of residence and family size. Another separate category for this standard is transportation, which includes ownership, operating and public transportation costs.

The proposed changes to these standards are:

  • Expand household expense categories to include larger households instead of giving families of five or more the same standard as a family of four.
  • Include an allowance for cell phones under the category of utilities. Currently, cell phones are only allowed if the taxpayer has no landline phone.
  • Remove the allowance for public transportation and replace it with an allowance for a second vehicle.
  • Include a standard for out-of-pocket health care costs. The standard will be established as a floor on a per-person basis and possibly based on age.

"I'm not so sure about eliminating public transportation and adding a second vehicle," Scott said. "That doesn't help those who use public transportation because they normally don't have a vehicle. On the other hand, with the exception of the largest cities in the country, where public transportation is a way of life, it's used mostly by people whose income isn't enough to generate a tax liability, other than maybe a disallowed Earned Income Tax Credit."

Scott, however, does like the possible health care change.

"I'm excited about adding the standard for out-of-pocket health care," she said, adding people always need Band-Aids, aspirin and other over-the-counter health care products. "It will be interesting to see what they come up with."

JK Harris currently includes $50 for out-of-pocket health care expenses. However, it is up to the discretion of the IRS whether to allow it or not.

About JK Harris:
JK Harris & Company, LLC, (http://www.jkharris.com) based in North Charleston, S.C., is the nation's largest tax resolution firm and has served over 200,000 customers since its founding in 1997 by John K. Harris. JK Harris consultants are available to meet with consumers in over 425 locations nationwide by appointment only. The company also provides services for student loan debt, investment fraud, fee-based financial planning, tax return preparation, and audit representation.

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