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Posted by Pat Raskob

Do I Qualify for Financial Hardship?

Do I Qualify for Financial Hardship?

Taxpayers that owe taxes and find it difficult to pay their taxes can enjoy a break from the IRS financial hardship program. You can apply for the program if you can’t feed yourself or your family and still owe taxes. 

The program prevents Uncle Sam from seizing your property, withholding your paycheck, and freezing bank assets. The program will not cut taxes but will keep reminding you of your debt till it’s paid. 

What is the IRS Financial Hardship?

The IRS considers taxpayers to be facing financial hardship if they cannot have basic living amenities because of their tax debts. The board has boundaries to consider basic living amenities and different instructions on how to apply for the various programs. Some of the programs use actual expenses, while others may use the national IRS standards or regional standards. 

Who Qualifies for Hardship?

To qualify for IRS financial hardship, you must be unable to pay your tax debts because of low funds and inability to support your family. Uncle Sam will determine if you qualify through Form 433A, 433B, or 433F. 

Here are some general requirements to qualify:

  • Income is less than $84,000 each year.

  • You are below or need more funds after getting basic living amenities.

  • Basic living expenses are lower than the IRS guidelines determined by four methods called collection financial standards. They are:

  • Food, householding expenses, clothing, personal expenses, and miscellaneous items.

  • Out-of-pocket health expenses

  • Housing and utilities

  • Transportation

The calculation is simple; total your basic living expenses and deduct them from your monthly income. The remaining amount is called net disposable income and belongs to your taxes. However, you can qualify if you have little to no disposable income. 

What hardship programs are available?

The IRS financial hardship programs are two; partial pay installment agreement and currently not collectible status. 

Partial Pay Installment Agreement

The partial pay installment agreement, shortened as PPIA, enabled taxpayers to pay their taxes in small installments. You can use the PPIA if you qualify for the Fresh Start or 84-Month Pilot program. Uncle Sam may assign a financial investigation at the start of the application and expect an increase in payment if you start receiving higher income. 

Currently Not Collectible Status

Currently Not Collectible Status is the second initiated program, also shortened as CNC. You can use the CNC when you have no funds to pay your debt. In most cases, the IRS stops the collection of these debts. However, according to the IRS, you can only qualify if you reach a certain financial status. Keep in mind that the program does not cancel your tax debts but stops the IRS from collecting activity of monetary value. 

In addition, while you are a member of this program, the IRS takes time to organize your past-due tax debt but continues to run. In summary, it won’t be long before the IRS runs out of time to collect your debt. When the status of limitation expires, the IRS will forgive the tax debt.

Your Rights

The IRS financial hardship program prevents the IRS from disturbing you concerning your debt, including seizing your assets, stopping the signing of your paycheck, or taking money forcefully from your bank account. 

However, the program does not forgive your debt, but the debt continues to incur penalties and interest. The IRS will inform you each year of how much you owe and what to be paid after termination of the hardship program. The program can last up to 10 years, but the IRS will review your financial status after every two years. The IRS will terminate the status as soon as they realize your income can cover your and your family’s expenses. Afterward, you can start remitting your tax debts.



Pat Raskob
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