If the taxpayer is a wage-earner the IRS will calculate the monthly gross income by how often the taxpayer is paid per month. For example, if a taxpayer is paid weekly, the gross income is calculated by the gross amount ($500) multiplied by the average number of weeks in a month (4.3), which is $2,150 per month. If a taxpayer is paid bi-weekly, the gross income is multiplied by 2.17 to determine the monthly gross income.
If the taxpayer is self-employed, the IRS generally looks at the last filed tax return Schedule C Profit and Loss Statement to get the net income for the year, and divide it by 12 months. If the current income is lower than the last filed return, the taxpayer must provide an updated profit and loss statement along with corresponding bank statements. The IRS is looking to see if the total gross receipts indicated on the profit and loss statement matches the deposits from the bank account statements.
If the taxpayer receives “other income”, it will also be included in their Collection Information Statement. For example, income from social security benefits, pension, distributions, rental income, etc. In addition, for collection purposes, income includes any money that the taxpayer receives to pay for their necessary living expenses, whether the source of the funds is taxable or nontaxable. For example, child support and personal loans from family members will be included as a source of income for the purposes of the IRS determining whether a taxpayer has the ability to pay their back taxes.
