For the IRS, one difficulty is more than not having the funds to go out to dinner and buy new clothes; financial difficulties must show that a taxpayer is having difficulty paying necessary and reasonable living expenses. Taxpayers don't need to prove that they are currently experiencing financial difficulties. The IRS can accept that you are having financial difficulties (economic difficulties) if you can show that you can't pay or can barely afford your basic living expenses. For the IRS to determine that you are in a difficult situation, it will use your financial collection rules to determine the basic living expenses allowed.
What are IRS financial difficulties? What are basic living expenses? What are the IRS requirements for financial difficulties? What is a billing information statement? IRS Fresh Start Program: Not Currently Chargeable (CNC). Offer to pay in commitment installments. To show that you are struggling financially, you must show that, after expenses, you do not have the income available to pay back taxes. The IRS sets the monthly allowable expenses in its Financial Collection Rules.
Assuming that you don't have access to asset capital, your income must match or be less than the monthly expenses allowed by the IRS. If you have been working with an IRS representative, you can ask the IRS to mark “situation 53” on your file or request to be told that it is currently not taxable. While this situation is stressful, if the IRS approves taxpayers for having financial difficulties, there are resolution options that allow them to improve their income situation without tax payments worsening their problems. When the IRS approves taxpayers for having financial difficulties, the IRS suspends their collection efforts and, therefore, they are protected from having a tax lien imposed on one of their assets as long as their status is listed as uncollectable.
In other words, the IRS decides if you can pay them based on the financial information you provide them through Forms 433. If you are unable to make any payments at this time, you may be eligible for current non-collectable status, which is a temporary status that the IRS will place in your account until your situation improves or until the time when the IRS has to collect the taxes due (usually 10 years) expires. Under the IRS economic hardship rules, if a person faces unfair financial hardship after collecting their outstanding taxes, they may qualify for “uncollectable” status. These requirements are much easier to obtain than the IRS program for people with financial difficulties, and they require much less personal information.
The difficult economic situation may stop tax collection activity during certain tax years in which the taxpayer has an obligation, but the IRS does not grant this condition lightly. If people have an unpaid tax balance but are unable to pay due to the need to financially support themselves or their families, they may qualify for tax relief options from the IRS for financial difficulties that allow them to reduce their tax debt, settle their debt in smaller increments, or be temporarily exempt from the tax collection process. In such cases, the uncollectible condition may be the bridge you need to get out of your current difficult situation and permanently free yourself from IRS collections. The IRS definition of financial hardship is when a taxpayer is unable to pay their basic living expenses.
Facing a situation where paying your tax debt causes you unreasonable financial difficulties and you can't afford your basic living expenses is difficult, especially knowing that failing to pay the tax bill revealed when you file your tax return will result in non-payment of fines, charges, or fines. To determine if you qualify, the IRS will require you to provide detailed financial information by completing a form 433-F or 433-A, Collection Information Statement.
