Proving Financial Hardship to the IRS

If you owe some back taxes to the IRS, then you need to try and pay them back as soon as you possibly can. Sometimes, though, you may not be able to pay these taxes because you are in a bad financial situation. If you have no money and no job, then you may be able to get some reprieve by proving financial hardship to the IRS. When this happens, you may be able to be placed in a special status that will allow you to pay less or allow you to pay later on.

If you are in a position where you know you will not be able to pay on your IRS taxes anytime soon because of your money issues, then you need to make an application for the IRS to consider you under hardship status. If this happens then your tax debt will be labelled Currently Not Collectible. This means that the IRS will stop making attempts to collect the money that you owe them. Keep in mind, though, that this status is meant to be temporary and can be reviewed again in the future and changed.

How to Prove Hardship

Proving hardship is going to require a lot of work on your part, as you are going to have to give the IRS an accurate picture of what your financial situation is like and what accounts for it. If, for example, you are not able to work because you have a disability, then you will need to prove this. If you have medical records and information from your doctors that details your disability, then you will need to give all of this to the IRS so that they can evaluate it properly.

If the IRS is going to determine that you face a financial hardship, then they are going to need to look at what you and your family currently spend each month. That means that you will need to break this down for them and provide bills and receipts where you can. The IRS is going to look at your monthly income and compare it to what they have determined are monthly allowable expenses. These are the national averages for expenses such as food, clothing, accommodation, etc. If you don't make as much income as the total of these allowable expenses, then you may be granted a hardship status.

If you expect to have any success with this application, then you're going to need to be as accurate as possible. While you might think it's okay to leave out an expense or two from your monthly expense report, this is not going to be okay. The IRS is going to be thorough when it comes to verifying the information that you have submitted for review. To have the best chances of success, you need to make a great effort to provide every detail that you can. This is what will get you the results that you want.

If You Are Rejected

Proving financial hardship to the IRS is something that takes some time and effort. Not everyone who tries to do this is successful. If you are not successful in your attempts to prove hardship, then you may have some other options open to you. You may be able to get an installment plan that will allow you to pay off your debts in monthly chunks. Or, you may be able to negotiate an Offer in Compromise which will allow you to pay a smaller portion of your tax debt and have the rest relieved.