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ABOUT SIGNIFICANT HARDSHIP ACCOUNTS

When a taxpayer is unable to make installment payments and can prove that enforcement of a levy would create significant undue economic hardship to the extent that the taxpayer would be deprived of basic necessities the IRS will classify the back tax debt as currently uncollectible and designate hardship status. Currently uncollectible accounts continue to toll interest and penalties during the period of suspended collection activity but allow time for your economic circumstance to improve before collection activity resumes. 

"Significant hardship" is a highly subjective determination and number of factors are considered when making a determination of "significant hardship" . Enforcement action, in and of itself, is not a hardship without additional factors.

Significant hardship considerations are made on a case by case basis. To properly evaluate your eligibility for uncollectible accounts status, tax authorities will consider the following points:

  • Will the taxpayer be able to retain housing?

  • Will the taxpayer be able to obtain food?

  • Will the taxpayer be able to retain utilities

  • Will the taxpayer be able to retain or obtain transportation to and from work

  • Will the taxpayer be able to remain employed

  • Will the taxpayer be able to obtain essential medical treatment and medications

  • Will the taxpayer be able to obtain reasonable clothing and shoes

  • Will the taxpayer sustain an avoidable loss of education

  • Will irreparable damage be caused to the taxpayer's credit rating

  • Will the taxpayer be unable to meet payroll. 

  • Will the taxpayer be in forced into bankruptcy. 

  • Is the hardship sure to occur.

Tax authorities will often grant immediate State or IRS hardship status but will require completion and remittance of Form 433A, and Form 433B if you are self employed to assess your overall financial position and net disposable income.  The relevant taxing agency will use these forms or a similar State form to determine the extent of your ability to pay your back tax debt and will subsequently determine your continued hardship eligibility based on their definition of "reasonable and necessary" living expenses that are limited by prescribed financial standards.  

If you currently fail to meet the required standards the State and IRS will often grant hardship status, but can and often do require that you adjust your reasonable and necessary living expenses to levels consistent with their prescribed financial standards. 

The State and IRS will normally reassess your eligibility for financial hardship status, annually.  Financial hardship status often provides only a temporary stay, and does not provide permanent back tax debt relief.  Therefore, remedies should be explored to reduce or eliminate the back tax debt. There is a wide spectrum of State and IRS policies, procedures, programs and tactics that have the potential to eliminate or reduce the back tax debt. 

If you fail to remain in compliance with your current tax obligation to file and or pay the service center may remove you from hardship status and begin collection activity. 

OUR PRIVACY AND SECURITY POLICIES

Our organizational policies guarantee that "only" contact initiated by you and required to complete the income tax services we have been commissioned to perform or to provide guidance sought will occur at any time, now or in the future 

 

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