Millions of taxpayers struggle to pay their IRS bills every year, but IRS hardship requirements offer a way for those in genuine financial distress to qualify for “Currently Not Collectible” (CNC) status—temporarily halting all collection efforts. This guide explains the requirements and steps to help you seek uncollectible status if paying your tax debt would push you into hardship.
Step-by-Step Guide to IRS Hardship & Uncollectible Status
1. Understand What IRS Hardship Means
- The IRS defines financial hardship as a situation where paying your tax debt would leave you unable to cover necessary living expenses like rent, utilities, food, and medical care—not just being tight on cash or stressed about money.
- CNC status is a temporary relief. You still owe the tax debt, and penalties/interest continue to accrue.
2. Who Qualifies for CNC Status?
- Individuals or household members with income limited to government assistance, unemployment, or disability payments.
- Taxpayers whose expenses far exceed their disposable income, leaving no ability to pay even a small monthly amount.
3. Gather Your Proof
- Prepare documentation of your financial situation:
- Pay stubs, unemployment statements, benefit letters.
- Utility bills, rent/mortgage statements, medical bills.
- Bank statements showing balances and transactions.
- You’ll need to fill out IRS Form 433-F (Collection Information Statement), listing income, expenses, debts, and assets.
4. Calculate Allowable Living Expenses
- The IRS uses national and local standards for food, clothing, medical, housing, transport, and other essential expenses.
- Your net disposable income (income minus allowable expenses) determines if you qualify. If it’s negative, or so low that payments mean missing necessities, you likely qualify.
5. Apply for Uncollectible Status
- Call the IRS at 800-829-1040 and request CNC status due to hardship.
- Submit your completed form (433-F/A/B) and supporting documents.
- The IRS reviews your case and may place your account into CNC, stopping all new collection actions except seizing future tax refunds.
6. While on CNC Status
- Continue filing returns as required. CNC is reviewed periodically, so improved finances mean collections could resume.
- Consider other options like installment agreements or offers in compromise if circumstances change.
Key Facts for Taxpayers
- CNC status protects against wage garnishments, bank levies, and property seizures, but a federal tax lien may still be filed if debts exceed $10,000.
- Uncollectible status is mostly for individuals, sole proprietors, and small business owners—not for corporate entities.
- If the IRS agrees to your case, they’re acknowledging your inability to pay, not erasing the debt outright.
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