Owe IRS – They Can Determine You are a Hardship, What You Need to Know

IRS Policy Statement 5-71

Reporting accounts receivable as currently not collectible—General

If, after taking all steps in the collection process, it is determined that an account receivable is currently not collectible, it should be so reported in order to remove it from active inventory.

Hardship

As a general rule, accounts will be reported as currently not collectible when the taxpayer has no assets or income which are, by law, subject to levy.

However, if there are limited assets or income but it is determined that levy action would create a hardship, the liability may be reported as currently not collectible.

A hardship exists if the levy action prevents the taxpayer from meeting necessary living expenses. In each case a determination based on its own circumstances.

Know the IRS Hardship Rules

It is important that people are aware that qualifying for IRS Hardship is not always easy. There is a strict set of requirements to meet the standards to be considered hardship status, and only a small percentage of people who apply for this status are approved.

Your chances of being approved are much higher if you are working with a tax professional who knows the system like Fresh Start Tax LLC.

Some basic IRS hardship rules include:

• You cannot spend more than the “national average” (which is determined by the IRS) on your basic monthly needs, including food, clothing and personal care items.

• You must not have any assets available that can be seized or sold for money in order to pay your tax debt.

• You must be able to prove that you are in a dire financial situation and truly facing financial hardship.

• You must be able to fully document your financial statement to the Internal Revenue Service.

•  All your tax returns must be filed and up-to-date.

If you have any questions call us today and speak directly to a true tax professional.