An economic difficulty occurs when we have determined that the tax prevents you from covering 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 definition of financial hardship is when a taxpayer can't afford their basic living expenses. If taxpayers have trouble financially maintaining the health and well-being of their families, the additional expense of paying their taxes will only worsen their situation.
However, taxpayers who find themselves in this situation can sometimes opt for tax relief options through the IRS that allow them to improve their financial stability before continuing to pay taxes. These are much easier to apply for than the IRS program for people with financial difficulties and require much less personal information. While IRS approval to declare themselves in financial distress will allow taxpayers to temporarily stop paying their tax obligations and protect their assets from taxation, it is important for taxpayers to know that, until they have paid off their tax debt in full, penalties and interest will continue to accrue on the value of their tax liability. To learn more about IRS financial difficulties, if you qualify, and how to apply for compensation for financial difficulties, read on.
If people are having trouble paying the amount listed on their tax bill without sacrificing some of these necessary living expenses, the IRS can offer them arrangements that allow them to make smaller tax payments, agree on a lower tax settlement amount, or temporarily delay tax payments until they have a more stable financial situation. In other words, the IRS decides if you can pay them based on the financial information you provide them using Form (s) 433. You must convince the IRS that you can't pay and that forced collection would cause serious financial difficulties. If you can't pay your tax bill because you have enough money to survive after supporting your family, you may be eligible to receive compensation for financial hardship from the IRS. If your account is currently considered to be experiencing financial difficulties by the IRS and you owe taxes for the following year, that situation is not automatically transferred; each tax year is considered separately.
The IRS rules on economic hardship can apply to an account for up to 10 years, which is usually the time the IRS has to collect back taxes before the statute of limitations takes effect. The types of assets on which the IRS can impose a tax lien include real estate, personal property, or other financial assets. Accounts can acquire CNC status for a variety of reasons, but the stipulation that appears to take into account the difficulties of the IRS states that “collecting liability would create difficulties for taxpayers because they would not be able to cover the necessary living expenses.”.
