IRS Currently Not Collectible/Hardship Status/Status 53

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If a taxpayer is unable to pay his or her tax liability, and collection activity would create an economic hardship the IRS will consider placing the account in a “hardship” or currently not collectible status. In considering a taxpayer’s account for “hardship” status the IRS will compare the taxpayer’s monthly gross income against what they call “allowable” expenses. IRS monthly allowable expenses are national averages for food, clothing, miscellaneous expenses, housing, transportation, medical expenses and insurance, as well as proper tax withholding and payments. These “allowable” amounts vary depending on household size and local standards as well.

“Hardship” is a subjective term and even though a taxpayer’s monthly expenses may exceed IRS allowable amounts it doesn’t mean that such status is not warranted or achievable. In some cases a taxpayer may have excessive medical expenses in caring for themselves or a loved one, and “hardship” status may still be granted. In all cases in order to be consider currently not collectible, the taxpayer must provide the IRS with financial information on Form 433A, and supply supporting documentation. If a taxpayer is over IRS allowable expenses in a situation such as the above example, supporting documentation is even more critical. Understand that the IRS is going to look at your circumstances with a critical eye, and frivolous or fraudulent claims in an attempt to gain “hardship” status carry severe penalties, including criminal charges.
Being placed in “hardship” status is not a permanent solution to a tax problem. A taxpayer that is currently not collectible will have his or her status reviewed every 18 to 24 months by the IRS to determine if “hardship” status is still warranted. However, being considered currently not collectible has strategic planning merit if other viable solutions to a tax problem exist. For example if a taxpayer is close to the collection statute expiration date on a given tax assessment, being put in “hardship” status for the remainder of that statutory period would result in the relief of those liabilities once that date has passed. Additionally, a taxpayer may be considering bankruptcy and a temporary placement in “hardship” status may allow a taxpayer to wait out any remaining statutory time necessary before those liabilities become dischargeable in a bankruptcy proceeding. These strategies and techniques require professional analysis in most cases, it’s important to consider such advice before making any decisions in handling your tax problem.

I have prepared a video for you to watch to learn even more about IRS Currently Not Collectible Status.

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Comments on IRS Currently Not Collectible/Hardship Status/Status 53

August 11, 2008

Cathy Chambers @ 12:20 pm #

my husband has been deceased for 15 years, my financial situation really hasn't changed,however I've never received a reminder notice from amount from irs and i have been receiving refund cks from where i work so should i contact them and asked about status or wait to hear from them and figure they would auto. keep refunds if i still owed. worried about interest and penti.i've also been told if i would ever remarry and file joint again, they would start billing my new spouse. is that possible?

August 12, 2008
August 21, 2008

Benjamin @ 12:06 pm #

Darren, Just listened to your video on hardship status. You seem like a pretty decent guy, personable, good humor, and probably not a rip off. Im pretty screwed right now. I just got a levy for $12 grand, my paycheck is going to disappear. I also have an outstanding debt of about 40 grand, with interest growing. I used to make quite a bit of money as an internet marketer but the company split, and overnight my cash was gone. Essentially I stuck my head in the sand. Well I am the search manger for a marketing firm now, but Im not making near what I was. Low 40's now. There is no way I can pay this money back. I am in collection for medical stuff, my rent is high, my salary is low. Essentially I am trying to figure out if this OIC is something I can tackle myself, should I pay someone – if so how much, should I even bother? Hell, I don't know. I wasn't even going to consider talking to one of those pennies on the dollar guys, Ive been an online marketer too long to fall for that but you seem to at least give the impression of being on the level, so I thought I might ask your advice. I just signed off on the levy so my next check is going to be gone.. Damn the man.

October 27, 2008

Robert @ 8:30 pm #

Darrin:

I just listened to your video and have a couple of questions for you. I have a tax lien from Alabama for $15,000 most of it penalities and interest. I have not filed income taxes for the past 6 years, I have been out of work on and off for the past 6 months, my wife works part time and we have no money to pay these taxes. Also, I had a heart attack last Novemeber and couldn't work for some time. Could I file a hardship for my taxes, or would bankrupcy chapter 7 help us?

December 4, 2008

bob @ 4:58 pm #

I owe $36 Fedtax on $13,000 income from year 2006 and I am getting hit with all kinds of penalties, I was injured in a car accident, left dissabled, recieved nothing and as a result have trouble finding employment.
I live in am expensive part of the country, sandiego, And have nothing left over after rent and food.
Can I get tax penelty relief?, I can only afford to pay the original amount I owe. I herd in hardship casses you can get some form of relief. Need to knowe fast intrest is compounding. Should I pay it, become homless and go on well fair or can I get relief from tax penalties.
Thank you

bob @ 5:01 pm #

correction amount owed $360 to irs and was told the pennaltys are more than double.

January 2, 2009

Theresa @ 4:19 pm #

Hello, I am a single parent of 4 kids and I owed the irs around 10,000 but now with them taking my income tax refund and my stimulus payment this past year and along with me making a few payments, I owe around 5,000, Well I think I do because interest is piling up so I am probably back where I started from, I told the customers service rep back when I set up the payments that I did not have the money to make payments but I set them up anyway and now of course I dont have the money, I seriously can't pay the rest of this debt and if I dont get my income tax refund this year me and my kids will be out on the streets. What can I do so that the money they have already recieved can be payment in full or something. This economy is bad and hard working people are catching it bad. I am not trying to get away with anything but I just cant pay it, I cant do installments or anything. I Thank you I welcome your advice.

January 22, 2010

Katherine Miller @ 2:04 am #

I have the same problem as you Theresa and really need some help. I have a small daughter and I owe the IRS around 11000 due to an audit that I didn't know about. I have all the information to clear up the misunderstanding but they told me it would take 120 days to get it resolved. I was wondering if I could get placed in currently not collectible and still file my taxes for this year and receive my refund and clear up the problem with an audit reconsideration to reopen the audit and submit proof of my deductions. I really need to be able to file my income tax right away and receive my refund, but I am scared to do it when I know they will take it. I really can't afford to wait the 120 days to do the audit reconsideration and then however long it will take to get the results and have my debt cleared. Is currently not collectible a good move for me or will they still take my income tax if I am in currently not collectible status? Please help.

January 29, 2010

Chris @ 6:51 pm #

Darrin,
I am an independent contractor with a week-old levy against earned commissions. I need the money to pay business expenses and stay in business. Is there any allowance for "hardship" or being able to keep some money for operating expenses?

It sounds like if I were an employee, I could have a majority of my regular income even with a levy in place. Why the different treatment for self-employed taxpayers who also have bills to pay? Is there any way around this or some code word I need to use?
Thanks, Chris

December 29, 2010

Florence Manfra @ 9:06 pm #

I'm thinking of requesting 53 status but I've been reading some stuff online, and I don't understand the "why's" behind a couple of the statements:

1. "You cannot have expenses that are too high" or you may not be accepted as Currently Not Collectible – ISN'T THIS CONTRADICTORY?

2. "You will have to prove that your monthly expenses and your LIQUID ASSETS are GREATER than your monthly income". – IF YOUR LIQUID ASSETS are greater than your monthly income why would one want 53 status to begin with anyway?

Maybe the wording in the above two items were incorrect but nevertheless it caused me some confusion!

And one more thing – which I cannot seem to find anywhere on the Internet – if you have a Trust Agreement will the IRS seek it out, and must it be included on Form 433f?

January 26, 2011

nise @ 11:56 am #

My sister and brother in laws tax accountant filed their taxes wrong by inputing information on the wrong line for 2007 and 2008. Since the accountant has passed. IRS is threating to sieze all assets in 30 days if they do not pay 5k of penalties. If they sieze the assets does this clear them off the books?

February 8, 2011