Collection Financial Standards
Definition
Collection Financial Standards are the IRS's annually updated allowable expense tables — National Standards, Local Standards, and Healthcare Standards — used to determine how much of a taxpayer's income can be considered discretionary for collection purposes.
Why This Matters for Tax Relief
The IRS Financial Standards are derived from Bureau of Labor Statistics Consumer Expenditure Survey data and are updated annually, typically in April. They set the upper limit on what the IRS will accept as 'necessary' expenses when evaluating OIC applications, installment agreements, and CNC determinations. National Standards cover food, clothing, housekeeping supplies, personal care products, and miscellaneous expenses — they apply uniformly nationwide and scale by household size. Local Housing and Utilities Standards vary by county and cover rent/mortgage, property taxes, and utility costs. Local Transportation Standards cover vehicle ownership (loan/lease) and operating costs (gas, insurance, maintenance) and vary by IRS region. Out-of-Pocket Healthcare Standards cover medical and dental expenses not reimbursed by insurance. The 'lesser of' rule applies: if you spend less than the standard, only your actual amount is allowed.
2026 Update
The 2026 annual update to Collection Financial Standards was postponed from April 1 to June 1, 2026, due to BLS data processing delays. The 2025 standards remain in effect for all IRS determinations made before June 2026. The National Standards increased modestly from 2025: 1-person from $800 to $839, 4-person from $2,050 to $2,129.