Paying taxes is a duty that all U.S. citizens must fulfill, expat or not. However, some individuals might find it challenging to pay their taxes, including their back taxes. Whatever the reason is – whether it’s the pandemic, job loss, or financial mismanagement – the IRS is there to throw a lifeline for taxpayers via the IRS Hardship Program.
Applying for the hardship program tags your tax status as “currently not available.” However, this doesn’t mean you are entirely free of what is due.
So, what does the IRS Hardship Program entail? This article will present its overview and its corresponding qualifications.
What is the IRS Hardship Program?
The IRS Hardship Program is created for individuals incapable of paying their tax debt, with the government postponing any collection activities for taxpayers experiencing hardship. Part 5, Chapter 16, Section 1 of the Internal Revenue Manual (IRM) details the provisions for tax accounts that are in “Currently Not Collectable” or CNC status.
No property will be taken nor will money be deducted from your salary if you are enrolled in the program. Consequently, you can benefit from having more time to pay your back taxes.
However, while the government will halt any attempts of back taxes collection, you’ll still owe back taxes and constantly receive reminders from the IRS about your tax debt. Additionally, penalties and interests will continue to accumulate.
Qualifications for the IRS Hardship Program
If you are currently struggling to keep up with your tax duties, you may be eligible to enter the IRS hardship program as long as you meet these qualifications.
1. Limited or no funds left after accounting for basic living expenses
Once the IRS assesses your financial situation and finds out that you can barely meet your family’s basic living needs, then the IRS might allow you into the hardship program. Furthermore, the IRS may require proper documentation of your inadequacy to support your family’s basic living expenses.
2. Living expenses fall within the IRS guidelines
The IRS includes four categories for allowable living expenses, namely:
- Food, housekeeping supplies, clothing, personal care products, and miscellaneous items
- Out-of-pocket health care expenses
- Housing and utilities
The IRS utilizes these “collection financial standards” so they can determine taxpayers’ ability to pay. Specifically, you must have little or no net disposable income—which is the amount left after deducting your total allowable living expenses from your monthly income—to qualify for the hardship program.
How to Apply for the IRS Hardship Program
If you think you meet all the qualifications mentioned above, then follow the steps below to start your IRS Hardship Program application.
1. Assess your tax status
Work with an IRS representative and ask them to mark “Status 53” or “Currently Not Collectible” status on your file. Status 53 entails the IRS representative or collector to file Form 53, which is a Report of Currently Not Collectible Taxes”
The IRS files this form internally and may result in the IRS requiring you to provide further information or submitting the Form 433-A, Form 433-B, or Form 433-F.
2. Submit the necessary documents
If you are a wage earner or a self-employed individual, you could receive uncollectible status by completing Form 433-A or Form 433-F. Meanwhile, you must use Form 433-B if you have a business.
These forms request extensive information about your financial situation. The IRS utilizes this information to assess your collection potential—that is, if you can afford to pay back your tax debts.
3. Make sure you have the correct information
Regardless of whether you’re using Form 433-A, Form 433-F, or Form 433-B, you must provide complete and correct information for the following items to give the IRS a full picture of your current financial status and your ability – or inability – to pay taxes.
- Bank accounts
- Investment portfolios
- Retirement savings
- Real estate
- Life insurance
- Other assets that the IRS deems to have significant value and can be used toward your back taxes
- The individual market value for each of your assets
- Your earnings statements for the last three months
- A statement outlining your spending over the previous three months
- A report of a three-month average of your income and expenses broken into categories
Relief Through Hardship
The IRS understands if you’re incapable of paying taxes, with the IRS Hardship Program designed to ease your worries in such a situation.
If you need a tax resolution partner in applying for the IRS Hardship Program, Tax Samaritan offers the best-in-class service. Tax Samaritan eliminates all risks by ensuring your tax preparation is accurate and thorough. Contact us today and we’ll be more than happy to assist you.