Over the last two months, the IRS has made two administrative changes that we didn’t previously cover that impact the collection of taxes, predominately from low income taxpayers. One is fairly negative (National Standards for collection potential), and I have mixed feelings about the other (paying taxes while buying a Big Gulp).
Deflation Nation
The Service has issued updated National Standards for taxpayer expenses when determining collection potential. These amounts are what the Service views as reasonable expenses for food, housekeeping supplies, clothing, and miscellaneous expenses. A taxpayer can rely on the National Standards without having to put forth any evidence of the actual expenses paid. The Service also issues amounts by County for taxpayers for expenses relating to housing and utilities. If a taxpayer seeks to claim expenses in excess of the National Standards (or local for housing), the taxpayer has to substantiate the same and prove the additional expense is necessary. This can be onerous, especially for people using predominately cash, those who are ESL, and those with temporary housing.
The most recent National Standards, and at least some of the local housing and utilities amounts, have decreased from 2015. The new 2016 amounts are:
| Expense | One Person | Two Persons | Three Persons | Four Persons |
| Food | $307 | $583 | $668 | $815 |
| Housekeeping supplies | $30 | $60 | $60 | $71 |
| Apparel & services | $80 | $148 | $193 | $227 |
| Personal care products & services | $34 | $61 | $62 | $74 |
| Miscellaneous | $119 | $231 | $266 | $322 |
| Total | $570 | $1,083 | $1,249 | $1,509 |
| More than four persons | Additional Persons Amount |
| For each additional person, add to four-person total allowance: | $341 |
While in 2014 (and I think 2015), those amounts were:
| Expense | One Person | Two Persons | Three Persons | Four Persons |
| Food | $315 | $588 | $660 | $794 |
| Housekeeping supplies | $30 | $66 | $69 | $74 |
| Apparel & services | $88 | $162 | $209 | $244 |
| Personal care products & services | $34 | $61 | $64 | $70 |
| Miscellaneous | $116 | $215 | $251 | $300 |
| Total | $583 | $1,092 | $1,249 | $1,482 |
| More than four persons | Additional Persons Amount |
| For each additional person, add to four-person total allowance: | $298 |
For larger families, the amount increased slightly, but for smaller families, the amount decreased, when many taxpayers making these types of offers were already feeling the pinch. Various local amounts for housing and utilities also decreased, some of which by over $100. When putting both together, collection potential is increased by well over $100, perhaps approaching $200 per month. Having worked in the clinic at Villanova and assisting various pro bono clients in my private practice, I know most taxpayers using these standards felt the national amounts were difficult to live on and assumed significantly more discretionary income than they had. That got squeezed a bit more with these adjustments.
7-Eleven Payment Heaven
The IRS has issued a new cash payment option largely aimed at helping unbanked taxpayers pay their taxes. The notice can be found here. The payment option allows taxpayers to use cash to pay their taxes at the over 7,000 domestic 7-Elevens (not sure it works in the roughly billion international 7-Elevens—I had no idea it was so popular overseas). This is being done with a partnership with PayNearMe and ACI Worldwide’s Officialpayments.com. With rumors that the IRS will stop allowing walk in cash tax payments (already only allowed in limited locations) and taxpayers receiving penalties for certain cash payments, any additional payment method for those without bank accounts and credit cards is welcome. I’ll be honest, the idea of 7-Eleven collecting our taxes is entertaining and seems quintessentially American (even if it is owned by a Japanese company). It also makes me nervous, as outsourcing tax collection in other areas has not panned out well, and the franchise model strikes me as potentially allowing for less corporate oversight (7-Eleven in Australia is also currently battling a huge human rights issue over its wages). Also, Slurpees are gross. But, apparently other countries have been using 7-Elevens to pay some taxes and traffic tickets, so maybe this will work out splendidly.
Ignoring the major Slurpee issue, the IRS program requires the taxpayer to go to IRS.gov and to the payments page (so, no bank account, but easy access to the internet is needed). There you select the cash option, and walk through the steps. Once the taxpayer’s info is in the page, the taxpayer will receive an email from Officialpayments.com, which confirms their information. The IRS then has to verify the information, at which point PayNearMe sends the taxpayer another email, with a link to a payment code and instructions (this is sort of seeming like a pain in the @$*). The individual can then print the payment code, or send it to his or her smart phone. The taxpayer then can go the closest 7-Eleven, make the payment, and receive a receipt. Only $1000 per day can be paid, and there is a $3.99 charge per payment.
I applaud the notion, but the implementation, especially for low income and ESL, seems pretty onerous. I’m not sure all taxpayers who may need to use this service have easy access to the internet, computers, email addresses, printers, and/or smart phones. Not to mention, there are quite a few steps, this does take a while, and we are charging them to pay their taxes.
The IRS is also encouraging taxpayers to start the process well ahead of tax time, due to the three step process, and the fact that the funds “usually posts to the taxpayer’s account within two business days.” The notice does not indicate what the payment date is for the penalties and interest, but the notice would seem to indicate it is the posting date and not the date the taxpayer hands the funds over to 7-Eleven. I don’t think Section 6151 has a Kwik-E-Mart exception for time of paying tax, and I do not think 7-Eleven qualifies as a government depository under Section 6302, so taxpayers do need to be certain to allow for substantial time to pass between the payment date and the tax return due date.