IRS examinations are intimidating. Mistakes are made. That’s why it’s important to have the knowledge of an experienced IRS tax attorney at your disposal.

Typically, during an IRS examination, the auditor wants to do a full review of items on (and off) your client’s tax return. Then, when the exam is nearly complete, the IRS agent wants you to sign an agreement for an increase in tax. Or maybe not, if there’s more tax to find.

Lately, IRS has brought back into use this additional “required” form. And now, accountants representing clients are asking me: “Do we have to complete the IRS Form PLE, or “Estimated Personal Living Expenses” to finish an audit?”

Here’s a Quick Scenario

DisagreeA business owner is represented by a CPA in a federal tax audit. The IRS agent and the accountant finish the exam, and agree on the changes in tax, per the audit. A “Tax Examination Change Report” is issued. Maybe both sides are satisfied. Maybe.

But as the accountant is getting ready to leave, the auditor gives him a new document. The examiner gives no reason or explanation, and demands that the form be completed, and returned within two weeks.

The document is the “Estimated Personal Living Expenses (PLE)” Form.  This form asks over 35 different categories of information, about your client’s personal financial lifestyle. Some of the questions, like “how much does the taxpayer spend monthly on entertainment …” inquire well beyond the items on the tax return.

Does IRS Really Need Personal Living Expenses?

Look at it this way. Here are the CPA’s problems:

  • If the audit is truly over, why is IRS still seeking information?
  • Can this information cause her client’s audit to change?
  • This detail will take significant time, which has already been poured into the audit.
  • Isn’t it the auditor’s job this to figure out this information?

So … what is the purpose of this form, and is it actually required from the taxpayer?

No!The easy answers: This form is REQUESTED, but NOT REQUIRED.

The purpose of the form:

  • To help the exam agent evaluate the taxpayer client’s personal cash funds usage, possibly to see if maybe there is some undetected, unreported income, or
  • To assist a collection agent with determining a minimum monthly payment for a tax Installment Agreement.

Obviously, neither option is absolutely favorable to your client.

Lesson: You have to ask the tax examiner what is his/her purpose in demanding the document. If the auditor wants the information, then he or she can simply answer the question during the interview. You can gauge whether providing this information is helpful to your client. But no, you are not required to submit your client’s personal expense information. Frankly, during an audit, why would you?

I mentioned earlier: IRS examinations are intimidating. Mistakes are made. Poor audit results do happen. Client relationships are damaged. If you need help – protect your client by getting experienced help from a specialized IRS tax attorney like myself.

Contact me today for any and all CPA tax representation. But if you choose to represent your client, remember, “Requested, but not required”. Let’s not make this basic mistake.


Jeffrey Anton Collins

Tax Attorney (Former IRS) serving Naperville, Wheaton, Downers Grove, and the rest of the Chicago Metro Area.


GAO Report – Tax Administration: More Criteria Needed on IRS’ Use of Financial Status Audit Techniques (Letter Report, 12/30/97, GAO/GGD-98-38)