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Is a Hardship Suspension Possible When You Can’t Pay Your Taxes?

By February 26, 2016June 18th, 2022No Comments

When you owe taxes, you are expected to pay. If you don’t pay in full and you do not make some type of payment arrangements with the Internal Revenue Service, they can use aggressive tactics to collect what you owe. You could have your wages garnished or a levy may be placed on your bank accounts, among other collection efforts.

Sometimes, however, you simply cannot pay because of serious financial hardship. When this happens, it may be possible to get the IRS to temporarily suspend its efforts to try to collect.  You’ll still owe the back taxes and penalties and interest will continue to accrue, but hardship status does at least allow you to avoid having your money and property taken when you truly cannot afford to pay.

Just because a hardship suspension is available, it does not mean it is the best choice. You should talk with professionals offering tax debt help in the Boca Raton area to find out what options are available to you in dealing with the IRS. They can help you create the best possible solutions for resolving your tax debt as quickly as possible.

Understanding a Hardship Suspension With the IRS

The IRS makes clear that it can report your account “currently not collectible” when it is determined you do not have enough money to pay back what you owe.  Policy Statement 5-71 gives the IRS the authority to report that an account should be put into “Currently Not Collectible” (CNC) status.  Internal Revenue Manual 5.16.1 sets forth the procedures that must be followed to determine if collection on an account is possible or not.

In order for the IRS to determine that your debt is CNC, you must truly have no ability to make payments.  The IRS will make this determination after you provide a complete financial disclosure. You’ll need to give information on your income from all sources, as well as your required living expenses. The IRS will also want to know what liabilities and debts you have, as well as all assets you own.

When the IRS looks at whether you have money left over after required living expenses, the reasonableness of the expenses is considered as well. For example, if you have a very expensive car or rent payment that causes you to have no money at the end of each month, the IRS may not grant hardship status, even though your available cash is technically zero.  You cannot escape your tax liability just by taking on lots of expensive obligations.

If the IRS does grant you hardship status and declare your account CNC, collection activities will be suspended. The IRS has 10 years to try to collect back taxes; however, if the taxpayer is in CNC for any period of time when the 10-year statute of limitations expires, the debt is ultimately eliminated. However, if your financial situation improves and you are taken out of hardship status, you could have to pay back a larger sum of money since penalties and interest will have accrued even when collection efforts were suspended.

Before you make a decision to try to request a hardship suspension, you should get Boca Raton tax debt help to find out if there are other options, like negotiating an offer in compromise to settle your debt by paying back less than you owe. Reach out to a professional with East Coast Tax Consulting Group to get help determining the best option for you and your family.

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.

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