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 difficulties are for taxpayers who can't pay their back taxes. The technical term used by the IRS is currently non-collectable State.
The second part explains the reasons why the IRS should accept your tax extension offer due to IRS difficulties. For the IRS, an economic difficulty is more than not having the funds to go out to dinner and buy new clothes; financial difficulties should show that the taxpayer is having difficulty paying necessary and reasonable living expenses. In other words, the IRS's economic difficulties are usually not aimed at most large companies, but rather at individual taxpayers and small business owners. If you're facing financial difficulties from the IRS, the best thing to do is to hire a professional tax advocate for those difficulties.
If you're having financial difficulties and owe taxes, consider taking the steps below to work with the IRS to settle your debt. Accounts can acquire CNC status for several 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.” In other words, the IRS decides if you can pay them based on the financial information you provide them through Forms 433. To prove your tax difficulties to the IRS, you'll need to submit your financial information to the federal government. If you can't pay your new taxes, you can ask the CNC to pay for financial difficulties during that tax period, but this will become more and more difficult every year. Under the IRS rules on economic hardship, if a person were to face unfair economic difficulties after the collection of their outstanding taxes, they may be eligible for “uncollectable” status.
If you can't pay the new taxes, you can request that the new taxes be made part of the IRS's hardship payment category, although it will be more difficult to do so if you continue to owe new taxes. To learn more about IRS economic difficulties, if you qualify, and how to apply for compensation for economic hardship, read on. Form 433B: Used for C corporations, S corporations, and companies that apply for a difficult economic situation with the IRS. If your income has increased, the IRS may take you out of the IRS's state of economic hardship because it believes you're better able to support yourself and pay your taxes.
Consider the difficulties of the IRS if you can't pay your back taxes and you don't qualify to request an agreement with the IRS. If possible, it's best to pay the new taxes promptly, as they probably won't affect your difficulties with the IRS in recent years and will prevent you from incurring more debt.
