Apply for Hardship Status
Ease Your Burden: Apply for Hardship Status Today
HARDSHIP STATUS & HARDSHIP TAXES HELP
Contact Dreis Tax Services, specializing in determining hardship status, to resolve your tax debt based on your financial situation.
The Internal Revenue Service provision in the Internal Revenue Manual Section 5.16.1.2 permits individuals or companies facing financial difficulties to suspend their cases and file them under a noncollectable status.
A substantial number of taxpayers with tax issues are unaware of the existence of a hardship status.
Owing to their present financial predicament, almost 50% of taxpayers do not have the financial capacity to pay their taxes. If you are currently facing hardship and require assistance with your IRS matter, reach out to Dreis Tax Services, a tax professional, today. We can be of assistance in resolving your IRS troubles.
CONDITIONS FOR A HARDSHIP STATUS
When the IRS reviews a taxpayer’s Collection Information Statement (Form 433A or 433F) and discovers that the individual cannot afford basic living expenses or lacks significant equity in their assets, a case may be placed in Hardship Status.
In light of current economic difficulties, such as increased foreclosures and job loss, the IRS is becoming more open to considering these circumstances and placing more cases in noncollectable status.
Additionally, if an individual’s sole source of income is from social security and they are faced with high medical bills, the government is often quick to grant a hardship status.
ECONOMIC HARDSHIP AS DEFINED BY THE INTERNAL REVENUE SERVICE
Each individual has their own idea of what financial difficulty means for them, and similarly, the Internal Revenue Service has their own criteria for determining economic hardship for those with IRS troubles.
The standard used to assess economic hardship by the IRS has been a challenging issue for both practitioners and taxpayers. Although the standard is available on irs.gov, the IRS rarely makes exceptions to it. This information has been provided to our client base.
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SUMMARY OF ECONOMIC HARDSHIP
When an individual’s liability can be collected in full, but collection of the federal tax would create an economic hardship, the IRS will consider all facts before initiating collection action or enforcement measures such as federal tax liens or federal tax levies.
The concept of economic hardship is based on Treasury Regulations § 301.6343-1. Economic hardship is defined as a situation where the individual is unable to meet reasonable basic living expenses.
The IRS will determine what constitutes a reasonable amount for basic living expenses, considering the unique circumstances of the individual.
However, unique circumstances do not encompass maintaining an affluent or luxurious lifestyle. The IRS, in accordance with the United States Department of Labor, has established platforms to determine these hardships and living standards.
These standards are also utilized by the United States Department of Justice during regular U.S. bankruptcy proceedings. As economic hardship is defined as the inability to meet reasonable basic living expenses, it only applies to individuals (including sole proprietorship entities).
Economic hardship compromise is not available to corporations, partnerships, or other non-individual entities.
The individual’s financial information and unique circumstances must be thoroughly examined and documented to determine eligibility for economic hardship.
Financial analysis includes reviewing basic living expenses along with other factors. The IRS may conduct a review of the last three years, examine all cancelled checks, and complete a full asset check.
They will scrutinize credit reports, loan applications, and asset sales for the last three years. The IRS will also investigate if the individual has made assets inaccessible to them.
The individual’s income and basic living expenses need to be evaluated to decide if the claim for economic hardship should be approved. Basic living expenses are those that provide for the health, welfare, and income production of the individual and their family.
National and local standard expense amounts aim to provide accuracy and consistency in determining the individual’s basic living expenses. These standards are guidelines, and if it’s determined that a standard amount is inadequate to cover the individual’s basic living expenses, some alterations can be made.
More comprehensive information can be found on our website. The IRS will require the individual to provide reasonable substantiation and document the case file. A 433-A financial statement is mandated by the Internal Revenue Service for all these cases.
In addition to the basic living expenses, other factors to consider that may impact the individual’s financial condition include:
- The individual’s age and employment status,
- The number, age, and health of the individual’s dependents,
- The cost of living in the individual’s residential area, and
- Any extraordinary circumstances such as special education expenses or natural disasters.
- Medical situations that have affected the individual’s life or those in their family.
- The individual’s education may also be considered.
- This list is not exhaustive. Other factors may be taken into account when making an economic hardship determination
Factors that support an economic hardship determination may include:
The tax professional will assess the situation of an individual who is unable to earn a living due to a long-term illness, medical condition, or disability. This situation may likely result in financial resources being exhausted to provide care and support during the course of the condition.
The individual might have a fixed monthly income that is entirely allocated to dependents’ care, leaving no other means of support available.
Though owning assets, the individual is unable to borrow against their equity, and liquidating them to settle outstanding tax liabilities would render them unable to meet basic living expenses.
Moreover, a family member of the individual has been affected by a catastrophic event caused by an unforeseen act of God.
It is crucial to recognize that each case is unique and is evaluated on its own merits.
HOW TO APPLY FOR HARDSHIP STATUS
To reach Hardship Status, get in touch with Dreis Tax Services. Don’t contact the IRS directly to avoid complications. We will help you determine if you qualify and guide you through the necessary forms and documentation required for your case. Ensure all tax returns have been filed before applying. Dreis Tax Services can handle your case professionally and increase your chances of getting Hardship Status.
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