Everything You Need to Know About Hardship Tax Relief

IRS Economic Hardship Tax Relief

Economic Hardship IRS Program helps taxpayers who have experienced a “hardship” that prevents them from paying their taxes.

The Economic Hardship IRS Program was created in response to the Great Recession to help taxpayers with their tax debt problems. There were many taxpayers who were struggling to pay their taxes, and the IRS wanted to do something about it. People who had filed for bankruptcy, suffered a natural disaster, been unemployed for more than 27 weeks, or suffered a financial hardship due to an unexpected loss of income can apply for the program.

If you are facing financial hardship, you may be eligible for tax relief. This means that you can reduce or eliminate your federal income taxes, state income taxes, and/or local property taxes.

The federal tax relief hardship program is designed to assist taxpayers who are unable to pay their back taxes. So, taxpayers in need can apply for IRS status as “Currently Not Collectable.” The IRS hardship program may be available to you if you are unable to pay taxes after paying for basic living expenses. While you have IRS hardship status, the IRS cannot take collection measures against you, such as:`

  • Taking possession of your property

  • Garnishing your wages

  • Removing money from your bank account

For those who need assistance with their finances, tax laws also offer a variety of relief options:

  • Hardship exemptions

  • Low-income credits

  • Earned Income Tax Credit (EITC)

  • Child and Dependent Care Credit (CDCC)

For this and other IRS Help, consider consulting with an attorney from Hutton Tax Solutions.

What Does the IRS Consider a Financial Hardship?

Financial hardship is a situation in which someone has difficulty paying their bills. The IRS determines if someone qualifies for a hardship exemption by looking at their income, liquid assets, and personal property and comparing it to their monthly bills.

An IRS definition of financial hardship is the difficulty a taxpayer faces in meeting their basic living expenses. It is necessary for taxpayers to prove that they cannot afford basic necessities such as food, clothing, and shelter to qualify for the exemption.

If you are searching for an IRS problem resolution, you may be eligible for the Economic Hardship IRS Program. However, The IRS provides a number of programs for taxpayers who are experiencing financial difficulties. An Oklahoma Tax Attorney can provide additional information and advice.

Proving Economic Hardship to the IRS

Your financial information must be provided to the federal government to prove tax hardship. You should use Form 433A/433F if you are an individual or self-employed. If you are a corporation or partnership, you should use Form 433B. These forms and supporting documents provide information regarding:

  • All assets owned by a taxpayer, including their banking accounts, investment portfolios, retirement accounts, vehicles, motorcycles, boats, real estate properties, life insurance policies, etc.

  • The market value of each asset

  • The last three months’ income statements

  • Expenditures for the last three months

  • Reporting a three-month average of income and expenses based on category

Many taxpayers are hesitant to submit a Collection Information Statement because it requires the release of highly sensitive financial records, so instead, they prefer to submit an online payment agreement. Unlike the IRS hardship program, these programs require a lot less personal information and are much easier to qualify for.

Financial Hardship Approval: Factors Considered

Your situation, including allowable living expenses, and any of the following factors will be considered by the IRS when determining your IRS financial hardship:

  • You were out of work for at least 12 months

  • Your income was below the poverty level for at least 12 months

  • You are a full-time student

  • Other suffered other severe financial hardships, such as losing your home or a loved one

The IRS also allows immigrants who do not meet these criteria to qualify if they have incomes below 50% of the poverty level and current countable assets below $3,000 at the end of the tax season.

IRS hardship rules can seem difficult to understand. To stop IRS penalties for back taxes, such as a tax lien on your property, you could consult with a tax professional for tax help. You may be eligible for affordable monthly payments or a more complete solution. A savvy tax attorney could help. Contact the tax pros at Hutton Tax for a free consultation.

How Can a Law Firm Help With Hardship Tax Relief?

The tax code is not always easy to understand. That’s why it’s important to have a skilled tax relief Attorney¬†from a reputable law firm on your side that can help you get the most out of the tax laws. When you owe taxes, they may be able to help you sort out your obligations in a fair and legal manner, so you can avoid any costly mistakes that would have unintended consequences.