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IRS Hardship | Tax Relief Programs | Florida

Updated: 11 hours ago

IRS HARDSHIP - TAX RELIEF PROGRAMS



Feeling the heat of the IRS on your back is never a "walk in the park.". The unrelenting pressure of the federal government can be incredibly stressful and intimidating, making tax relief solutions seem nearly impossible to achieve. Many taxpayers aren’t aware of the hardship options (tax relief programs) introduced by the IRS hardship program, and the opportunities it creates for individuals suffering with a tax bill. Under IRS hardship rules, if a person would face unfair financial hardship after the collection of their outstanding tax debt, they may be placed in "Currently not Collectible” status. Once declared currently not collectible, the IRS cannot take your paycheck or property in lieu of tax payment. An experienced tax advocate can help obtain hardship status for you. To learn more about IRS hardship, if you would qualify, and how to apply for financial hardship, read on.

This article is provided by the tax professionals at Flat Fee Tax Relief and contains the ins and outs of the IRS hardship (tax relief programs). It should equip you with the knowledge necessary for finding a tax relief program. You may find that regaining financial freedom might not be as impossible as it seems. Who Qualifies for IRS Financial Hardship?

If you’re unable to pay your tax bill because you have just enough money to get by after supporting your family and yourself, you might be able to receive IRS hardship. The IRS will use the information reported on the Form 433A, 433B or 433F to determine whether the account is eligible for tax hardship. Generally speaking, IRS hardship rules require:


1. An annual income less than $84,000 per year.

Little or no funds left over after paying for basic living expenses. 2. Living expenses fall within the IRS guidelines. The IRS includes four categories for allowable living expenses, called “collection financial standards”:

Food, clothing, housekeeping supplies, personal care products, and miscellaneous items

3. Out-of-pocket health care expenses

4. Health Insurance

5. Housing and utilities

Transportation


To analyze these finances, tally up your total allowable living expenses and deduct that number from your total monthly income; the resulting number is what’s called a “net disposable income,” and what the IRS expects you to pay toward your taxes. By proving you have little to no net disposable income, you can qualify for IRS hardship. What are the IRS Hardship Rules?

If your account is declared CNC under tax hardship, the IRS can no longer impose any collection procedures in an effort to settle your tax debt. Common collection methods include, but are not limited to:

a. Tax Lien - A federal tax lien is the government’s legal claim against your property when you neglect to pay a tax debt. It protects the government’s interest in your property—including real estate, personal property, and financial assets—until your debt is repaid in full.

b. Tax Levy - Whereas a tax lien secures the government’s interest in your property, a tax levy actually takes it away on their behalf and applies it to your outstanding debt. If you don’t make arrangements to settle your tax debt, the IRS can levy, seize and sell any property you own. If an IRS levy creates immediate financial hardship, it may be released, but that does not mean you are exempt from repaying your debt.

c. Garnished Wages - A tax levy (Sometimes called a wage levy or IRS wage garnishment) occurs when the IRS collects a portion or all of your wages and applies them to your outstanding back tax. A part of your wages may be exempt based on the amount of standard deductions and the number of personal exemptions you claimed, but the garnishment will continue until the amount of overdue taxes is paid, you make other arrangements to settle your balance, or the levy is stopped and released. IRS hardship rules can apply to an account for up to 10 years, which is generally how long the IRS has to collect back taxes before the statute of limitations are enforced. The IRS will review the taxpayer’s information every two years to ensure they still qualify for tax hardship. If they find an increase in income and believe it to be within your means to repay your taxes, they will remove the CNC status and revoke the IRS hardship.

While you’re in IRS Hardship, the agency cannot take your paycheck, seize your property, or wipe your bank account. However, just because they let up on their collection pressure does not mean your obligations are lifted. IRS hardship program does not stop penalties and interests. As of 2018, the IRS penalties for late filing and paying taxes include:

a. Failure to File - When you don’t file your tax return by the return due date, April 15th, or by the extended date if you had requested for a tax extension. b. 5% of unpaid tax to be reported - Charged each month through the month of May (or part of a month).

c. Failure to Pay - When you don’t pay the tax reported on your return in full by the due date or April 15th (an extension to file doesn’t extend the time to pay). 5% of the unpaid tax; 0.25% during an approved installment period (if the tax return was filed on time, and taxpayer is an individual); 1% if tax is not paid within 10 days of a Notice of Intent to levy. A recurrent charge on the remaining unpaid tax each month until the balance is paid in full or until 25% is reached


Did you catch how much steeper the penalty is for failure to file versus failure to pay; this is the IRS’s way of encouraging taxpayers to file a tax return every year, even if they’re unable to pay. For this reason, be sure to file your required return each year, even if you cannot pay at the time of filing.

If your account is currently considered in IRS financial hardship, and you owe taxes for an upcoming year, that status does not automatically roll over; each tax year is considered separately. If possible, it’s best to pay the new taxes promptly, since it likely won’t affect your IRS hardship from the past year(s) and it will prevent incurring further debt. Should be unable to pay your new taxes, it is possible to request CNC (#CurrentlynotCollectibe) IRS financial hardship for that tax period, but this will become increasingly more difficult each year. As noted, although the IRS will temporarily pause collection methods under CNC financial hardship, but IRS penalties will continue to apply and the IRS hardship rules enforce the eventual repayment of the outstanding taxes through alternative payment plans.



What are Alternative Payment Plans?

Every year within the IRS hardship program, the government will send you an email stating how much you owe in taxes. If you fall upon a sum of money, they recommend making payments when possible. However, the IRS does offer affordable alternative payment plans for taxpayers facing tax hardship, such as:


1. IRS Installment Agreement - A payment plan is an agreement to pay back your tax obligations over an extended period of time in a series of installments, and one of the best ways to avoid incurring a lien or levy. You’ll continue to incur interest and fees until the balance is repaid, but locking into an installment agreement can help prevent failure to pay penalties being added to your account in the future.

2. IRS Settlement - If you can be in Currently in Currently not Collectible status and owe more tha $10,000, an Offer in Compromise would the right way to go. Instead, of suspending the tax debt, an Offer in Compromise is a complete settlement.


How Can I find a Tax Advocate for Hardship?

The tax professionals at Flat Fee Tax Relief has been dedicated tax advocates for more than a decade. Our tax pros provide valuable tax debt help at a very affordable fee. Our teams are strategically located in Clearwater, Florida, and San Diego, California. This allows our teams to be available from 8 A.M. Eastern to 6 P.M. Pacific time. The extended work hours are an invaluable tool when stopping an IRS levy. Our trusted tax professionals will advocate on your behalf and find you the best form of back tax relief, whether it’s in the form of IRS hardship, installment agreement, or a complete IRS settlement.

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