IRS Tax Hardship
IRS hardship may help if you can’t pay basic living expenses and need relief from collection activity.
If you’re faced with IRS financial hardship, your best course of action is to hire a professional tax advocate for hardship. A trusted tax professional will advocate on your behalf and find you the best form of tax relief.
IRS Tax Hardship
IRS hardship may help if you can’t pay basic living expenses and need relief from collection activity.
If you’re faced with IRS financial hardship, your best course of action is to hire a professional tax advocate for hardship. A trusted tax professional will advocate on your behalf and find you the best form of tax relief.
What Is the IRS Hardship Program?
The IRS Hardship program helps taxpayers who are struggling to balance tax debts alongside their daily cost of living. 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 sensitive financial information to the federal government. Some taxpayers opt for an online payment agreement instead, which are much easier to qualify for than the IRS hardship program and require less personal disclosure.
Who Qualifies for the IRS Hardship Program?
If you cannot pay your tax bill because you have just enough money for basic living expenses, you might be able to qualify for a tax hardship.
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 report:
- Everything the taxpayer owns
- Bank accounts
- Liquid assets
- Investment portfolios
- Retirement savings
- Vehicles
- Real estate properties
- Life insurance
- Market value for each asset
- Income and spending statements for the past three months
- Three-month average of income and expenses
The IRS will use the information reported on Form 433 to determine whether the account is eligible for tax hardship. Generally speaking, IRS hardship rules require:
- An annual income less than $84,000
- Little or no funds left over after paying for basic living expenses
Basic living expenses fall within the IRS guidelines. The IRS includes four categories called “collection financial standards”:
- Food, clothing, housekeeping supplies, personal care products, and miscellaneous essentials
- Out-of-pocket health care expenses
- Housing and utilities
- Transportation
How to Prove You Are in Financial Hardship?
Tally up your total allowable living expenses and deduct that number from your total monthly income; the resulting “net disposable income” is 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.
What Are the Tax Hardship Relief Rules?
If your account is declared “Currently Not Collectible” under tax hardship, the IRS can no longer impose any collection activities to settle your debts. They cannot:
- Impose a tax lien to claim your property,
- levy or seize your property, or
- garnished wages from your paycheck
Note: The IRS hardship program does not stop tax penalties and interests.
IRS hardship rules can apply to an account for up to 10 years, which is generally how long the IRS has to collect back taxes before the statute of limitations is enforced.
How IRS Hardship Status Affects Future Tax Years
The IRS will review your taxpayer’s information to ensure you still qualify for IRS Hardship status. If they find an increase in income and believe you can repay your taxes, they will revoke the CNC and IRS Hardship status.
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 can’t pay your new taxes, you can request CNC status or IRS hardship for that period, but it gets harder each year. While the IRS pauses collections under CNC status, penalties still apply, and you’ll eventually have to repay through alternative payment plans.
How Do Alternative IRS Payment Options Work?
If your finances improve, the IRS may expect payment. The IRS offers payment plans for qualified taxpayers:
- Installment Agreements
- Settlement/Offer in Compromise
- Fresh Start Program
What Our Clients Say
Maria A. D.
Community Tax has been a great help to my problems. I first reached out to them in 2020.
Bob W.
I engaged Community Tax to help me with a substantial Federal Income Tax Liability. Due to my health…
Elsa U.
Community Tax is very good in helping others to solve their financial problems during the hardship times of their lives!
What Our Clients Say
Elsa U.
Community Tax is very good in helping others to solve their financial problems during the hardship times of their lives!
How Can I Get Help for Tax Hardship?
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 wage garnishment, or to understand your installment agreement.
We can alleviate the pressure of your tax bills and get you 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
What’s Next?
- Tell us about your tax situation
- We review whether hardship relief may apply
- We help you explore your next best option
