How Do I Qualify for an IRS Hardship?
Learn how the IRS determines financial hardship based on your income and living expenses, and the steps for requesting a pause on tax collection.
The Internal Revenue Service (IRS) offers a designation known as Currently Not Collectible (CNC) for taxpayers who cannot afford to pay their tax liability without it causing significant financial difficulty. This status is a formal acknowledgment by the IRS that forcing payment could prevent an individual from covering basic living expenses. CNC is a temporary suspension of collection activities, not a permanent forgiveness of the debt.
Being placed in CNC status means the IRS will temporarily halt aggressive collection actions, such as bank account levies or wage garnishments. While collection is paused, the underlying tax debt remains, and penalties and interest will continue to accumulate. The IRS will periodically review the taxpayer’s financial standing to determine if their ability to pay has improved.
Understanding IRS Financial Standards for Hardship
Qualification for Currently Not Collectible status is based on a financial calculation of a taxpayer’s monthly income minus their allowable monthly expenses. If income is insufficient to cover necessary living costs, the IRS may grant hardship status. The agency uses a structured set of benchmarks known as the Collection Financial Standards to ensure its assessments are consistent.
The IRS divides allowable expenses into two categories: National and Local Standards. National Standards establish fixed amounts for expenses like food, housekeeping supplies, apparel, and personal care. These figures include a miscellaneous allowance, are standardized nationwide, and vary by household size. The out-of-pocket health care standard provides a set monthly amount for costs like medical services and prescriptions.
Local Standards account for geographical variations in the cost of living for housing and transportation. For housing, the IRS sets allowable amounts for rent, mortgage payments, and utilities based on the taxpayer’s county. Transportation standards cover vehicle ownership or public transit costs, with figures differing based on metropolitan or non-metropolitan areas.
The IRS assesses a taxpayer’s total monthly income from all sources, such as wages, self-employment income, and pensions. The agency compares this total income against the sum of allowable expenses under both National and Local Standards. If expenses equal or exceed income, and the taxpayer has no assets that could be liquidated to pay the debt, they will likely qualify for CNC status.
Required Information and Forms for Hardship Status
To request hardship status, a taxpayer must provide the IRS with a detailed financial overview by completing a Collection Information Statement. Most individuals use Form 433-F, but the more detailed Form 433-A may be required for complex situations like self-employment. Current versions of these forms should be obtained from the IRS website.
On the form, you must list all assets to give the IRS a complete picture of your ability to pay. This includes the current balance of every bank account, the value of investment and retirement accounts like 401(k)s and IRAs, and details on any owned real estate or vehicles. It is important to be thorough, as the IRS can independently verify this information.
The form also requires a detailed breakdown of all monthly income sources for both the taxpayer and their spouse, including job-related pay, child support, alimony, or pension distributions. Following the income section, the taxpayer must itemize their monthly living expenses. This section corresponds to the National and Local Standards, with specific fields for housing, utilities, transportation, food, and medical costs.
Gathering the necessary supporting documentation before filling out the form is an important step. You will need recent pay stubs, bank statements for all accounts, and copies of household bills for items like rent, mortgage, and utilities. The IRS may request these documents to substantiate the figures listed on your Collection Information Statement.
How to Request Hardship Status from the IRS
With a completed Collection Information Statement and supporting documents, the next step is to contact the IRS to make the request. The primary method for this is to call the IRS directly. If you have received a recent collection notice, use the phone number on that notice; otherwise, the general taxpayer line is 800-829-1040.
When speaking with an IRS agent, state that you are requesting Currently Not Collectible status due to financial hardship. You will provide the information from your Form 433-F over the phone. Be prepared for the agent to suggest an installment agreement; if you cannot afford any monthly payment, you must communicate this clearly.
Following the phone call, the IRS agent will provide instructions on how to submit the completed Form 433-F and any required supporting documents. This may involve mailing or faxing the paperwork to a specific IRS service center. The review process can take several weeks while the agency verifies the information you provided.
Even after a request is approved, the IRS may still file a Notice of Federal Tax Lien, which is a public claim to your property, particularly if the debt is over $10,000. To maintain CNC status, you must remain compliant by filing all required tax returns on time. The IRS will periodically review your account, and if your income increases, your CNC status may be revoked and collection activities can resume.