If you have an unpaid tax balance and can't afford basic living expenses, you may qualify for one of the IRS's hardship payment alternatives. To determine if you qualify, the IRS will ask you to provide detailed financial information by completing a form 433-F or 433-A, called a Tax Information Statement. An economic difficulty occurs when we have determined that the tax prevents you from covering your basic and reasonable living expenses. For the IRS to determine if a lien is causing economic hardship, it will generally need you to provide us with financial information, so be prepared to provide it to you when you call.
The IRS financial hardship program is designed to help taxpayers who would not be able to cover their necessary living expenses if they had to pay their tax bills. The second part explains why the IRS should accept your tax extension offer due to IRS difficulties. Because your financial situation directly affects your eligibility to receive hardship status from the IRS, if your income decreases due to one of the following circumstances, this could affect your ability to receive hardship status from the IRS. If you can't pay your tax bill because you only have enough money to survive after supporting your family, you may be able to qualify for the IRS because of financial difficulties.
The IRS doesn't always grant a tax extension for economic hardship, but that doesn't mean the taxpayer should give up minimizing debts, charges, and tax penalties. As already mentioned, although the IRS will temporarily suspend collection methods in the event of financial difficulties for the CNC, sanctions will continue to apply and IRS regulations on financial difficulties require the possible reimbursement of outstanding taxes through alternative payment plans. The IRS will use the information presented on Forms 433A, 433B, or 433F to determine if the account qualifies for tax difficulties. If they find an increase in their income and believe that it is within their means to pay their taxes, they will remove the CNC status and void the IRS obligation.
The IRS rules on difficult living conditions 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 limited liability companies where an individual owner is identified as a responsible taxpayer. In this case, the taxpayer must explain their current financial environment and demonstrate current or possible financial difficulties. In other words, the CNC IRS difficulties are generally not aimed at most large companies, but rather at individual taxpayers and small business owners. Once eligibility is determined, taxpayers may find IRS Form 433-A useful, as it contains the necessary information that the IRS will look for.
You may think that you are eligible to face economic difficulties; however, the IRS may view your financial situation differently. Before you apply for the status of a person with financial difficulties from the IRS, you should consider submitting an offer of transaction, which is also known as an agreement. If you are an individual taxpayer and believe you are eligible for financial hardship status from the IRS, you can apply by completing Forms 433A or 433F.
