Get Free Quote

    How to Prove Financial Hardship to the IRS

    A majority of the individuals who owe money in IRS back taxes are unable to pay. They have no job, no income, and no assets. However, even when someone lacks these things, the IRS will still come after them to pay their tax debt. It is not right to take this kind of abuse from the IRS. However, unless you take the necessary steps to get your account considered “Currently not Collectible” or placed in “Hardship,” the IRS will proceed by bombarding you with notices and phone calls.

    If you are positive that there is just no way you will be able to pay your tax debt now or at any point in the close future, a status declaring you either “Currently not Collectible” or “Hardship” is just the answer. You need to locate and put together all documentation that proves you are unable to pay your IRS tax debt. If a person is disabled, and therefore unable to work, provide all the necessary documentation, which would include government and hospital records. Monthly bills and pay stubs (if applicable) also need to be included.

    After you have been able to gather all the documentation that proves financial hardship, you need to mail it with Form 433 A, “Collection Information Statement for Wage Earners and Self-Employed Individuals.” This form requires you to divulge detailed information about the current financial situation you are undergoing. You will be required to provide the cost on different monthly expenditures, including all of the following:

    • All Utility Costs.
    • Apparel and Services.
    • Food.
    • Housekeeping Supplies.
    • Personal Care Services and Products.
    • Rent or Mortgage.
    • Death of an immediate family member

    If you are unable to qualify for IRS “Hardship Status,” do not worry. By establishing that you are currently in a bad financial situation, the IRS will provide other IRS programs that you will be able to qualify for. If you are able to prove that you do not have adequate disposable income, you are eligible for the following IRS programs.

    • Offer in Compromise.
    • Installment Agreement.
    • Suspended Collections.

    You need to remember that if you are deemed a “Hardship Status” case by the IRS, you will not be allowed to spend more money on basic needs than what is considered by the IRS to be the “national average.” As of March 1, 2010, this is what the IRS defines as monthly National Standards:

    • Apparel and Services – $86
    • Food – $293
    • Housekeeping Supplies – $28
    • Miscellaneous – $87
    • Personal Care Services and Products – $32

    It is not easy to prove to the IRS that you are a financial hardship case. To get your account placed under the status of “Currently not Collectible” or “Hardship” you need to be able to exhibit complete financial hardship. Because the standards are so rigid, very few individuals are able to meet these requirements. If you own assets that the IRS can seize and sell to pay off the tax debt, you are not considered eligible for a financial hardship status. If you employ a tax professional to review your case, they will be more helpful in trying to submit you as a financial hardship case.