Hardship Status
IRS
There are certain cases where a taxpayer doesn’t qualify for a settlement but also can’t afford payments. You might be on a fixed income or just scraping by—if that sounds like you, you may qualify for a hardship for your tax debt. We can assess your financial condition to determine if you qualify for a hardship status. Although it is a temporary status and requires providing extensive financial documentation to the tax authorities, it can be a good option for some folks. Contact us today for a free consultation to see if you might qualify for hardship status.
Questions?
What does the IRS call hardship status?
When a taxpayer submits enough financial information for the IRS to determine they cannot reasonably expect to collect any past due taxes, they will place the account in a status known as ‘Currently Not Collectible’ (CNC). You will be required to submit income information, specify any assets you own or are entitled to, a copy of all your bills and expenses, as well as anything else the IRS deems necessary to determine your financial condition and ability to repay the past due tax. We tell our clients it’s a bit like a financial proctology exam. Assuming you get everything they want and it matches the financial statement which shows you do not have an ability to pay, the IRS will agree to place your account in hardship status and deem the account ‘CNC’ on their systems.
How hard is it to get the IRS to place your account into CNC status?
For some taxpayers, it can happen over the phone with a surprisingly small amount of information. IRS has access to all of your reported income, and they can sometimes make an executive decision just based on the income level you reported on your return (or what your payers designated on your wage and income statements). For most taxpayers, getting the IRS to place the account into CNC is relatively easy, because it does not favor the taxpayer whatsoever. Penalties and interest continue to accrue while you are in hardship status, so IRS is happy to let the meter run and come to collect at a later date when you will likely be earning more income. IRS wagers that they will be able to collect more from you later if they let you skip paying now. So for some of our clients, CNC is not a great option at all, since the bill just increases and IRS will aggressively collect on the higher debt down the road. Please reach out if you would like to know if CNC is the best option for you or if hardship status may actually set you back in the longterm.
How much do you have to pay IRS each month if they place you in hardship status?
Nada. Nothing. Zilch. If IRS agrees that there is no reasonable collection potential and places your account in CNC status, you are not required to make any payments to IRS as long as your account is in hardship status. For our clients that just need a breather, or will never be able to afford repayment, CNC is the best option (even though it doesn’t reduce or address the debt). A small family that is barely making ends meet may be the best candidates for hardship, even if they will end up paying on the debt down the road, because they need to provide for the family now. The can gets kicked down the road but if that’s the difference between food on the table, or the lights on, or not, then it’s an obvious choice and one we would be happy to help you make if you think your family is in this position. Please reach out today for help negotiating hardship status if you can’t afford to make any payments on your tax debt at this time.