By: Law Office of Ray Haselman

What is Considered a Hardship to the IRS?

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The IRS defines financial hardship as a taxpayer who is unable to pay reasonable basic living expenses. A taxpayer who can show that they cannot pay or can barely pay basic living expenses may be able to convince the IRS of such. The IRS has determinable standards for food, clothing, housing, utilities, transportation, health care, and other miscellaneous expenses. If taxpayers’ costs exceed the standards set forth by the IRS, they may disagree with the hardship request. However, if the taxpayer can provide proof that the raised means are necessary for the welfare and health of your family or is essential to continue to produce income, they may accept it.

What Is The IRS Hardship Program?

A taxpayer may enter the hardship program, as laid out within the Internal Revenue Manual, by receiving a “Currently Not Collectable” (CNC) status from the IRS. The stipulation for a CNC status states, “collection of the liability would create a hardship for taxpayers by leaving them unable to meet necessary living expenses.”

To prove the necessity of hardship status to the IRS, the taxpayer will need to submit several documents along with financial information in the form of the following:

  • List of everything the taxpayer owns (this includes not only physical items but also financial assets such as accounts, insurances, and investment portfolio)
  • Each asset’s market value
  • Past three months’ income statements
  • Past three months’ spending statements
  • Average three-month income and expense based on category

Who Qualifies For Financial Hardship?

Generally speaking, you may qualify for financial hardship if you cannot pay your tax bill without jeopardizing the financial support your family needs. However, there are specific rules that the IRS requires:

  • Less than $84,000 in annual income
  • Little funds left over after paying essential expenses
  • Living expenses fall within IRS guidelines based on the following four categories:
  • Food, clothing, housekeeping, personal products, miscellaneous
  • Out-of-pocket health care expenses
  • Housing and utilities
  • Transportation

What If An IRS Tax Levy Is Causing Hardship?

If you have a levy on your wages, bank, or other accounts that is causing you financial hardship, you need to contact the IRS immediately at the telephone number on the levy. According to the IRS, a levy on wages that is creating immediate economic hardship must be released. The IRS may also terminate a levy on other accounts if they have determined that it is causing a financial problem for you.

As with non-levy-related hardships, the IRS determines if you have an economic hardship that stems from a tax levy if you are being prevented from meeting basic, reasonable living expenses due directly to the levy. The IRS requires you to provide financial information to determine if the levy is causing hardship.

Releasing a levy does not exempt you from paying an outstanding balance. You will still need to work with the IRS to make a plan to pay off the back taxes. If you need legal assistance, give us a call at 786-522-0410.