Uniform standards affect offers-in-compromise, installment agreements.

The IRS has issued a revision to the Internal Revenue Manual that provides agents with new financial analysis procedures. IRS chief compliance officer Phil Brand says the procedures "establish a consistent framework for evaluating a taxpayer's ability to pay" overdue taxes. Agents will use the guidelines to decide (1) whether to agree to an offer in compromise that is based on uncollectibility of the debt and (2) what action to take in cases of uncollectible installment agreements.

The IRS has revamped its offer-incompromise program in recent years, resulting in more offers being accepted. The agency can compromise with taxpayers on grounds of doubt either as to liability or collectibility. Most compromises are based on the latter. A taxpayer submits an offer and the IRS either accepts or rejects it.

The revised guidelines are part of Internal Revenue Manual 5300, Balance Due Account Procedures. They establish national standards for reasonable amounts of five necessary expenses--food, housekeeping supplies, apparel and services, personal care products and services and miscellaneous--and local standards for housing, utilities and transportation. The IRS will use them to decide whether a taxpayer can pay a debt in light of his or her living costs.

Edited by Anne Wagenbrenner, JD, LLM, editor, AICPA client newsletters.