Taxation & Estate Planning

Gas at $4.00 gallon; IRS National Standards lag behind

By howardlevy

The Speedway gas station I can see from my suburban office window lists gas at $4.00 gallon. It now costs about $75 to fill-up a F-150 truck these days. At one fill-up per week, that is $325 per month for gas for one family car.

The IRS, in reviewing an ability to repay a tax liability, uses what it refers to as “Collection Financial Standards” as a guideline to determine what living expenses should be allowed before the IRS is paid. These guidelines include what the IRS will allow for gas, insurance, maintenance and repairs for the operation of a personal vehicle.

Here are some current IRS cost allowances for the monthly cost of operating one family car:

Atlanta $226            
Boston $225
Chicago $216
Cleveland   $186
Houston $263
Los Angeles $261
Miami $275
Phoenix $232
Seattle   $192

Keep in mind that these numbers include the cost of insurance, maintenance and repairs.

In every major city across the United States, that F-150 truck costs more in gas alone than the IRS is currently allowing for gas, insurance, maintenance and repairs combined.

The IRS will allow more than their standards if it can proven, but very few people keep every single one of their gas receipts to do this, or records to recreate where they drove.

The IRS allowances lag behind the economy and does not reflect the economic reality of what it costs to operate a personal vehicle.   Actual costs that exceed IRS allowances will be requested to be included in an repayment agreement, absent negotiation with collections otherwise.     

Full post as published by IRS and the Law on May 31, 2008 (boomark / email).