Hardship/Currently-Not-Collectible Status
HARDSHIP/CURRENTLY-NOT-COLLECTIBLE STATUS
Hardship Status (the IRS' term is "Currently-Not-Collectible") is a last resort, temporary remedy for some of my clients.
The only time it is worthwhile is when a taxpayer owes a substantial amount of tax, penalty and interest, is unable to pay-in-full, is unlikely to qualify for an Offer-In-Compromise, and cannot even make the minimum monthly payments required by the IRS under a formal Installment Agreement. Further, the taxpayer must be certain that their ability to make payments will improve in the near future.
If Hardship Status is granted by the IRS, a lien will be filed if not already, and collection will be put on hold. However, penalties and interest will continue to accrue, making this the least favorable of alternatives. If granted, the hardship status will last for 12 - 14 months, at which time the taxpayer must "re-qualify" for the same status, if necessary.
To qualify, the taxpayer will show the IRS that their monthly income is exceeded by their monthly expenses. If that is not the case, but, the amount left-over is minimal, the taxpayer may still qualify. The key factor is that the taxpayer cannot pay what the IRS requires on a monthly basis.
The ideal situation for a taxpayer considering Hardship/Currently-Not-Collectible Status is when there has been a significant drop in the taxpayer's income, which will be corrected within the next 12 -14 months. Also, if the taxpayer expects to receive a bonus from their employer, or a distribution from an estate for which they are a beneficiary, Hardship Status will create some time for those contingencies to occur, at which time the taxpayer can then, hopefully, pay their tax debt in-full.
Topics
Hardship/Currently-Not-Collectible Status
Hiring an IRS Representative
Innocent Spouse Relief
Installment Agreements
Liens and Levies
Offers In Compromise
Payroll Taxes and the Trust Fund Penalty (TFP)
Payroll Withholding Taxes
Substitute for Return (SFR)
Recent Updates
December 21, 2007
Payroll Taxes and the Trust Fund Penalty (TFP)
December 20, 2007
Substitute for Return (SFR)
