Cannot Pay the IRS – Ask IRS for Tax Hardship or Noncollectable – IRS Tax Relief Today

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If you cannot pay the IRS you may be able to qualify for a Tax Hardship or a Noncollectable Status if you qualify. If your current expenses exceed your income you may have a chance to get your tax case suspended for a period of time.

Most of the cases that have past due balances over 4 months old,  the IRS will not be able to collect in full at the current time.

The Internal Revenue Service has different programs in which taxpayers qualify to close their cases off of the IRS Collection enforcement Computer call the CADE 2.

There are at best guess over 25 million cases on the system that the IRS has made arrangements because the taxpayers do not have the ability to pay the tax in full. These back tax cases involve individual, payroll, excise, estate and a variety of other taxes.

From a common sense standpoint, all taxpayers cannot pay their tax obligations on time so the IRS has made other provisions to deal with back taxes.

The IRS will require a documented Financial statement. These financial statements are found on IRS form 433A or a 433F.  When sent to the IRS they must include all attachments to prove the validity of the figures found on the form.

Besides this form the taxpayer will have to have all tax returns filed and current.

The three most common way taxpayers can close case once IRS reviews a current financial statement.

IRS will consider these closing methods:

1. Hardship, the inability to pay the tax off at the current time and unable to make monthly installment agreement due to a lack of income. The taxpayer qualifies for a Tax Hardship or Noncollectable Status.

2. Installment agreements,the taxpayer has the ability to make current monthly payments,

3. Offers in Compromise, the taxpayer has the ability to consider a tax settlement with the IRS.
What is a Economic Hardship

When a taxpayers liability can be collected in full but collection would create an economic hardship, an ETA offer based on economic hardship can be considered.

The definition of economic hardship as it applies to ETA offers is derived from Treasury Regulations § 301.6343-1.

A IRS Economic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses.

The  IRS determination of a reasonable amount for basic living expenses will be made by the Commissioner and the representatives and will vary according to the unique circumstances of the individual taxpayer.

Because economic hardship is defined as the inability to meet reasonable basic living expenses, it applies only to individuals (including sole proprietorship entities).

Tax Compromises on economic hardship grounds is not available to corporations, partnerships, or other non-individual entities.

The taxpayers financial information and special circumstances must be examined by the IRS to determine if they qualify for an ETA offer based on economic hardship.

The Financial analysis includes reviewing basic living expenses as well as other considerations.

The taxpayer’s income and basic living expenses must be considered to determine if the claim for economic hardship should be accepted. Basic living expenses are those expenses that provide for health, welfare, and production of income of the taxpayer and the taxpayer’s family.

There are national and local standard expense amounts are designed to provide accuracy and consistency in determining taxpayer’s basic living expenses.

These standards are guidelines and if it is determined that a standard amount is inadequate to provide for a specific taxpayer’s basic living expenses, allow a deviation.

In addition to the basic living expenses, other factors to consider that impact upon the taxpayers financial condition include:

a. the taxpayers age and employment status,education,

b. Number, age, and health of the taxpayers dependents,

c. Cost of living in the area the taxpayer resides, and

d. Any extraordinary circumstances such as special education expenses, a medical catastrophe, or natural disaster.

e. past history and income made over the past 3 years.

This list is not all-inclusive. Other factors may be considered in making an economic hardship determination.

Some factors that support an economic hardship determination may include:

1. The taxpayer is incapable of earning a living because of a long term illness, medical condition or disability, and it is reasonably foreseeable that the financial resources will be exhausted providing for care and support during the course of the condition.

2. The taxpayer may have a set monthly income and no other means of support and the income is exhausted each month in providing for the care of dependents.

3. The taxpayer has assets, but is unable to borrow against the equity in those assets, and liquidation to pay the outstanding tax liabilities would render the taxpayer unable to meet basic living expenses.

Some of these factors are representative of situations the Service regularly encounters when working with taxpayers to resolve delinquent accounts.

They are not intended by the IRS to provide an exhaustive list of the types of cases that can be compromised based on economic hardship.

Call us today to find out more and speak directly to a tax professional. 1-866-700-1040