Walworth County, South Dakota: Navigating IRS Wage Levy & Hardship Status

Taxpayers in Walworth County, South Dakota, facing IRS enforcement actions, such as a wage or bank levy, must understand how the IRS assesses their ability to pay. The IRS uses a detailed financial analysis, typically outlined on Form 433-A, Collection Information Statement, to determine a taxpayer's disposable income. This calculation incorporates both National and Local Standards, ensuring a baseline for necessary living expenses. For instance, the National Standard for Food, Clothing, and Other Living Expenses for a single individual is $812 per month, while a family of four can be allowed $1983. Unfortunately, specific IRS Local Standards for Housing & Utilities are not available for Walworth County, SD, prompting taxpayers to justify actual expenses. The IRS acknowledges economic hardship under IRC §6343(a)(1)(D), allowing for levy releases if the levy prevents the taxpayer from meeting basic living expenses. These standards are derived from comprehensive data sources including IRS.gov Collection Financial Standards, the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey, and US Census Bureau American Community Survey data.

While specific IRS Local Standards for Housing & Utilities are not published for Walworth County, South Dakota (showing as N/A), taxpayers are not left without recourse. The IRS allows for reasonable actual expenses to be considered on Form 433-A. For comparison, the Department of Housing and Urban Development (HUD) reports a Fair Market Rent (FMR) of $1080.0 per month for a 2-bedroom unit in Walworth County for FY2025. If a taxpayer's actual housing expenses exceed the unpublished or generally applicable IRS standard, they can request a deviation, as outlined in Internal Revenue Manual (IRM) 5.15.1.10, 'Allowable Expenses; Deviation From National and Local Standards.' This process requires substantiation of expenses and a compelling argument that the higher cost is necessary and reasonable. Emphasizing that HUD FMR data often reflects the true cost of living can strengthen a deviation argument. While regional shelter CPI data is not available for this specific region, the HUD FMR provides a clear benchmark for typical housing costs in Walworth County.

Beyond housing, the IRS Collection Financial Standards provide specific allowances for other essential living expenses in Walworth County, SD. The National Standards for Food, Clothing, and Other Living Expenses are uniform across the U.S., allowing $812 per month for a single person, and up to $1983 for a family of four. These figures are based on the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey. For healthcare, the National Standard for Out-of-Pocket Healthcare expenses permits $75 per person per month for individuals under 65, and $153 per person per month for those 65 and over, derived from the Medical Expenditure Panel Survey. Transportation is covered by Local Standards; for Walworth County, owning one car allows for $588 per month for ownership costs plus an additional $270 per month for operating costs, totaling $858. For two cars, the allowance is $1176 for ownership and $270 for operating costs (for the region), based on BLS data and American Automobile Association (AAA) operating costs.

For Walworth County, South Dakota taxpayers facing severe financial hardship, the IRS offers Currently Not Collectible (CNC) status. This status temporarily halts IRS collection actions, including levies, when a taxpayer's income is insufficient to cover basic living expenses. To qualify, taxpayers must complete and submit Form 433-A, Collection Information Statement, detailing their income, assets, and allowable expenses. The IRS then compares the taxpayer's income to their total allowable expenses, using the National and Local Standards. For example, a single filer in Walworth County might have allowable expenses including $1080.0 for a 2-bedroom housing (based on HUD FMR, assuming a deviation is approved), $812 for food, $75 for healthcare (under 65), and $858 for one-car transportation, totaling $2825. If their net income is less than this total, they may qualify for CNC. IRM 5.16.1 outlines the procedures for CNC determinations, and IRC §6343 allows for the release of a levy if it creates economic hardship. Importantly, being placed in CNC status does not extend the Collection Statute Expiration Date (CSED) under IRC §6502, meaning the IRS generally has 10 years from the assessment date to collect the tax, regardless of CNC status.