IRS Wage Levy & Hardship Status in Madison, Wisconsin

When the IRS initiates enforced collection actions, such as wage or bank levies under IRC §6331, it assesses a taxpayer's ability to pay using a detailed financial analysis documented on Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. This process relies on IRS Collection Financial Standards, which include National and Local Standards, to determine a taxpayer's necessary living expenses and, consequently, their disposable income. For a single individual in Madison, Wisconsin, the National Standards allow $812 monthly for food, clothing, and other necessities. While specific housing and utilities standards are not provided for the Madison, WI HUD Metro FMR Area, taxpayers must substantiate their actual, reasonable expenses. The goal is to identify if collection would cause an economic hardship, as defined under IRC §6343(a)(1)(D), potentially leading to levy release or Currently Not Collectible (CNC) status. These crucial financial benchmarks are derived from various sources, including IRS.gov, Bureau of Labor Statistics (BLS) Consumer Expenditure Survey, and US Census Bureau American Community Survey data.

For taxpayers residing in the Madison, WI HUD Metro FMR Area, it is critical to note that the IRS Collection Financial Standards do not provide a pre-determined monthly allowance for Housing & Utilities. This means taxpayers must document their actual, reasonable housing and utility expenses on Form 433-A. While the IRS does not publish a specific standard for this region, the U.S. Department of Housing & Urban Development (HUD) Fair Market Rent (FMR) provides valuable context, showing a 2-bedroom unit in Madison, WI has an FMR of $1950.0 per month for FY2025. If a taxpayer's actual housing costs exceed what the IRS might typically allow in other areas, they can request a deviation from the standard, arguing for their actual, necessary expenses as outlined in IRM 5.15.1.10, 'Deviation from National and Local Standards.' The fact that HUD FMR data indicates significant housing costs, such as $1710.0 for a 1-bedroom or $2570.0 for a 3-bedroom, strengthens a taxpayer's argument for a deviation. Unfortunately, regional shelter CPI data from the Bureau of Labor Statistics is not available for this specific region to show year-over-year changes, but actual rent figures remain the primary factor.

Beyond housing, the IRS provides specific allowances for other essential living expenses. Under the National Standards, a single individual in Madison, Wisconsin is allowed $812 per month for food, clothing, and miscellaneous personal expenses. This amount increases to $1478 for a two-person household and $1983 for a four-person household, based on the Bureau of Labor Statistics Consumer Expenditure Survey. For healthcare, the IRS National Standards for Out-of-Pocket Healthcare allow $75 per person per month for individuals under 65, and $153 for those 65 and over, derived from the Medical Expenditure Panel Survey. For transportation, the IRS Local Standards for the Madison, WI region permit specific allowances. For a taxpayer owning one car, the ownership cost is $588 per month, with an additional $270 for operating costs, totaling $858 per month. For two cars, the total allowance is $1446. These transportation figures are based on Bureau of Labor Statistics data and American Automobile Association operating costs, ensuring taxpayers can maintain essential employment and personal travel.

Taxpayers in Wisconsin facing severe financial hardship may qualify for Currently Not Collectible (CNC) status, which temporarily halts enforced collection actions like wage levies (Form 668-W) and bank levies (Form 668-A). To qualify, a taxpayer must demonstrate on Form 433-A that their allowable monthly expenses meet or exceed their monthly income, leaving no funds available for tax debt payment. For example, a single filer in Madison, WI, with no dependents, might show total allowable expenses of approximately $3455.0 per month, comprising a 1-bedroom HUD FMR of $1710.0, National Standards for food/clothing of $812, out-of-pocket healthcare of $75 (under 65), and one-car transportation expenses of $858. If their net income is less than this total, they could be deemed CNC. IRM 5.16.1 outlines the procedures for CNC status, and upon approval, the IRS will typically release any existing levies under IRC §6343. It is crucial to understand that CNC status does not forgive the tax debt; rather, it pauses collection until the taxpayer's financial situation improves or the Collection Statute Expiration Date (CSED) under IRC §6502 is reached, which is generally 10 years from the date of assessment, and CNC status does not extend this statutory period.