Are you in need of tax relief due to financial hardship?

Many taxpayers aren’t aware of the Internal Revenue Service Hardship program, a federal government program that offers taxpayers suffering from financial hardship the opportunity to find tax relief.

Under IRS hardship rules, if a person would face unfair financial hardship after the collection of their outstanding taxes, they may be able to qualify for an “Uncollectible” status.

Once declared “Currently Not Collectible”, the IRS cannot begin any tax collection actions to take your paycheck or property in lieu of tax payment. With the help of a tax advocate for hardship, you can begin constructing an alternative repayment plan. Set up monthly payments you can afford, clear your name off the IRS delinquent tax list, and find back tax relief.

The IRS Hardship program is made to help taxpayers who are struggling to balance back taxes alongside their daily cost of living. Accounts can go into Currently Not Collectible status for a variety of reasons, but the IRS describes the main consideration for the IRS Hardship program as when , “collection of the liability would create a hardship for taxpayers by leaving them unable to meet necessary living expenses”.

To prove your tax hardship to the IRS, you will need to submit information about your financial situation to the federal government in a hardship request. Because the IRS hardship program requires the disclosure of very sensitive financial records and personal information such as a social security number, some taxpayers are weary of submitting a Collection Information Statement and instead opt for an online payment agreement instead. Payment arrangements like that are much easier to qualify for than the IRS hardship program and require much less personal disclosure.

If you’re unable to pay your tax bill because you have just enough money for basic living expenses, you might be able to qualify for a financial hardship program.

Applications are done using Form 433A/433F (for individuals or self-employed) or Form 433B (for qualifying corporations or partnerships). These Collection Information Statement forms and supporting documents from financial institutions would report:

• Una lista de todo lo que posee el contribuyente (cuentas bancarias, carteras de inversión, ahorros para el retiro, automóviles, camiones, motocicletas, embarcaciones, propiedades inmobiliarias, seguros de vida, etc.)
• Un valor de mercado correspondiente para cada activo
• Declaraciones de ingresos de los últimos tres meses
• Las declaraciones de gastos de los últimos tres meses
• Informar un promedio de ingresos y gastos de tres meses según la categoría

The IRS will use the information reported on the Form 433A, 433B or 433F to determine whether the account is eligible for tax hardship. Generally speaking, IRS hardship rules require:

• Un ingreso anual de menos de $84,000 por año.
• Poco o nada de sobra de fondos después de pagar los gastos básicos de vida.
• Los gastos de vida se encuentran dentro de las pautas del IRS. El IRS incluye cuatro categorías para gastos de vida permitidos, llamados “estándares financieros de recaudación”:
  • Alimentos, ropa, suministros de limpieza, productos de cuidado personal y artículos diversos
  • Gastos de atención médica de su propio bolsillo
  • Vivienda y servicios públicos
  • Transportación

Tally up your total allowable living expenses and deduct that number from your total monthly income; the resulting number is what’s called a “net disposable income,” and what the IRS expects you to pay toward your taxes.

By proving you have little to no net disposable income with reasonable living expenses, you can meet the eligibility requirements and qualify for the IRS Hardship program.

IRS hardship rules state that CNC codes can only be used for “individual or joint IMF assessments, sole proprietorships, partnerships where a general partner is personally liable, and LLCs where an individual owner is identified as the liable taxpayer”. In other words, non-collectible status and the IRS hardship tax relief program is generally not intended for most large-scale corporations, but rather individual taxpayers, self-employed individuals and small business owners.

Corporations unable to pay impuestos atrasados debido a dificultades financieras deben considerar recurrir a declararse en bancarrota.

If your account is declared CNC under tax hardship, the IRS can no longer impose any collection activities in an effort to settle your federal tax dues. Common collection actions include, but are not limited to:

• Embargo tributario. A federal tax lien is the federal government’s legal claim against your property when you neglect to pay a tax liability. It protects the government’s interest in your property—including real estate, personal property, and financial assets—until your dues are repaid in full.
• Incauto fiscal. Whereas a lien secures the government’s interest in your property, a levy actually takes it away on their behalf and applies it to your outstanding balance. If you don’t make arrangements to settle your tax balance, the IRS can levy, seize and sell any property you own. If a levy creates immediate financial hardship, it may be released, but that does not mean you are exempt from settling up on your outstanding payments.
• Salarios embargados. A veces llamados embargos de salarios, se produce cuando el IRS recoge una parte de sus salarios y los aplica a sus impuestos atrasados pendientes. Una parte de su salario puede estar exenta en función del importe de las deducciones estándar y del número de exenciones personales que haya solicitado, pero se le seguirá quitando hasta que pague el importe de los impuestos atrasados, haga otros arreglos para liquidar su saldo o se levante el embargo.

Las reglas de dificultades del IRS pueden aplicarse a una cuenta por hasta 10 años, que generalmente es el tiempo que el IRS tiene para cobrar los impuestos atrasados ​​antes del Estatuto de limitaciones is enforced.

The IRS will review the taxpayer’s information every two years to ensure they still qualify for IRS Hardship status. If they find an increase in income and believe you’ve overcome your economic hardships and that it’s within your means to repay your taxes, they will remove the CNC status and revoke the IRS Hardship status.

While you’re in IRS Hardship status, the government cannot take your paycheck, seize your property, or wipe your bank account. However, just because they let up on their collection activity and pressure does not mean your obligations are lifted. The IRS hardship program does not stop tax penalties and interests. The penalties for late filing and paying taxes include:

• No haber presentado la declaración. Cuando no presenta su declaración de impuestos antes de la fecha de vencimiento, el 15 de abril, o por la fecha extendida si solicitó una extensión de impuestos.
  • The penalty is 5% of the tax due (minus taxes paid on time and credits) for each month or part month late, up to 25%. The IRS calculates it as follows: Tax shown on return, minus timely payments and credits, multiplied by 5% monthly, capping at 25%. If over 60 days late, the minimum penalty is either the specified amount or 100% of the underpayment, whichever is smaller.
• Incumplimiento del pago. When you don’t pay the correct amount reported on your tax return in full by the due date or April 15th (an extension to file doesn’t extend the time to pay). The penalty for unpaid taxes is 0.5% per month, capping at 25% of the total unpaid amount.

Observe lo elevada que es la penalización por no presentar la declaración en comparación con por no pagar; ésta es la forma que tiene el IRS de animar a los contribuyentes a presentar la declaración de la renta todos los años, aunque no puedan pagar. Por esta razón, asegúrese de presentar su declaración obligatoria cada año, incluso si se enfrenta a dificultades fiscales.

If your account is currently considered in IRS financial hardship, and you owe taxes for an upcoming year, that status does not automatically roll over; each tax year is considered separately. If possible, it’s best to pay the new taxes promptly, since it likely won’t affect your IRS hardship from the past year(s) and it will prevent incurring further costs.

If you’re unable to pay your new taxes, it is possible to request CNC IRS financial hardship for that tax period as well, but this will become increasingly more difficult each year. As noted, although the IRS will temporarily pause collection methods under CNC financial hardship, penalties will continue to apply and the IRS Hardship rules enforce the eventual repayment of the outstanding taxes through alternative payment plans.

Every year within the IRS hardship program, the government will email you stating how much you owe in unpaid taxes. If you fall upon a sum of money, they recommend making payments when possible. However, the IRS does offer affordable alternative payment plans for taxpayers facing tax hardship, such as:

• Acuerdo de Pago a Plazos del IRS. Un plan de pago es un acuerdo para pagar sus obligaciones fiscales durante un período prolongado en una serie de cuotas, y una de las mejores maneras de evitar incurrir en un gravamen o embargo. Continuará incurriendo en intereses y comisiones hasta que se reembolse el balance, pero lograr un acuerdo de pago a plazos puede ayudar a evitar que no se paguen penalizaciones en su cuenta en el futuro.
• IRS Settlement/Offer in Compromise. Un Acuerdo con el IRS (sometimes called an Offer in Compromise) is sometimes a better option than IRS hardship. It’s an available alternative payment option for those who see no capability of paying off their tax liability within the immediate future. Instead, the taxpayer proposes an alternative amount to pay the IRS, and if the government accepts their offer, they compromise and settle with the proposed amount.

Si te enfrenta con dificultades financieras del IRS, lo mejor que puedes hacer es contratar un professional tax advocate for hardship. A trusted tax professional will advocate on your behalf and find you the best form of back tax relief, whether it’s in the form of IRS hardship, installment agreement, or settlement.

Community Tax provides industry-leading tax advocates for hardship. We offer attorneys to help you at every step of the way, whether it’s to stop tax liens, levies, and detener gravámenes, or to understand your installment agreement. We can alleviate the pressure of your tax bills allowing you to rest a bit easier and know you’re back on track to finding your way out of financial hardship. Contact us today to learn how Community Tax professionals can help make your tax problems a thing of the past.