financial hardship

Choosing to File for Financial Hardship

  • January 10, 2020

When you're dealing with financial hardship, just making ends meet throughout the month is a challenge, and it's likely you wouldn't be able to add another payment into your budget. That said, when you receive a letter from the IRS requesting regular payments on your outstanding tax debt, you cannot legally – and financially – afford to ignore this IRS collection attempt.

Given that scenario, as an alternative, you may be able to file for financial hardship and gain a temporary reprieve from this tax obligation. Should you choose to file for financial hardship, you need to understand the process that the IRS requires from people like yourself, who owe the government a repayment on their tax debt.

Filling Out the Required IRS Form

The process begins by filling out the appropriate forms. The IRS forms you will need to complete can be found on the IRS website, and links are available here too. If you are filing for a personal obligation, you will be required to complete and send in IRS Form 433-A. If you are making this request for a business tax debt, you will need to complete IRS Form 433-B.

The information the IRS is seeking on this form is relatively straightforward. You must provide details regarding your identity, finances and household makeup. Among the personal identity details needed, you must provide:

  • Your Social Security number and those of anyone else in your home
  • Names of all your dependents
  • Your address and phone number
  • A description of the home you live in, such as a single-family home, apartment, or manufactured home, etc.

Along with those personal details, you must also provide your employment information. The IRS will request details such as:

  • Your employer's name
  • Your employer's address and phone number
  • Copies of your paycheck stubs
  • Length of your employment
  • Your title or duties at work

All of this information will give the IRS a framework on which to base its decision on whether or not you qualify for a financial hardship reprieve. However, to make as informed a decision as possible, they will also ask that you include additional information like the name of your bank, what kind of bank accounts you have, what other income you have at your disposal (including alimony, child support, pensions and other monthly income), what legal proceedings you are involved in right now, and what expenses you pay each month. In fact, the IRS will request copies of your monthly bills for:

  • Utilities
  • Mortgage or rent
  • Medical bills
  • Transportation costs
  • Food
  • Personal expenses

You can mail in copies of all of these monthly obligations with your IRS form or submit them to your IRS agent if you have one assigned to your case. All of this information will help the IRS determine that you cannot satisfactorily pay on your tax debt each month and that if you had to, you and your family would experience undue financial hardships.

You Must Provide Your Last Tax Return

A potential roadblock is that this process will not proceed without a copy of your last tax return. When you submit the other paperwork, you should also provide the government with a copy of your last return. If you have missing returns, especially the previous year, you will likely be deemed ineligible for a financial reprieve. If you aren't current with your tax returns, you need to be current (up-to-date) before the IRS will consider your situation. And, it would be wise to provide copies rather than originals so that you have those available if needed in the future.

Your Best Choice is to Hire a Professional Tax Adviser

The IRS does not grant reprieves because of financial hardship very often, so be aware that it's not a common form of being able to (temporarily) solve your situation. In fact, it can be very difficult to persuade the agency that you cannot pay on your debt because of restricted financial means. As such, the IRS often advises people in your situation to hire a tax professional to guide you through this process. You can read more about proving financial hardship by clicking here.

In undertaking the financial hardship filing, you also need to know upfront that the process requires the utmost care to all details provided, to ensure that your argument is presented successfully to the government. When you hire a tax professional like myself, you will be guided through this process and told what documentation to provide in order to strengthen your case.

You may not know how many paycheck stubs the IRS needs, for example, to prove that you do not make enough money to make payments on a regular basis. A tax professional will give you counsel about what documentation could help the IRS render a decision in your favor, ad the specifics needed for each kind of documentation.

HOWEVER, PROVING HARDSHIP WILL NOT GET A REFUND RETURNED IF THAT REFUND WAS KEPT FOR PAST TAX DEBTS OR STUDENT LOANS OR CHILD SUPPORT. Why not sign up for a Game Plan to find out what your options are to avoid losing refunds in the future?

Even if you don’t qualify for a temporary financial hardship reprieve based on your financial circumstances, there are definitely other options you may qualify for. You'll need expert guidance to determine which course of action is best for your specific situation. Contact me and my Tax Problem Solver Team if you have unpaid tax debt, to find out what your options are – you need a Game Plan. You can reach me by email at Larry@TaxProblemSolver.com or phone my office at 855-BEAT-IRS (855) 232-5752).

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About the Author Larry Heinkel J.D. LL.M

Larry Heinkel is a tax and bankruptcy attorney with more than 38 years experience helping businesses and individuals, solve their state and federal tax problems. Mr. Heinkel has been extremely successful in representing his clients before IRS and DOR, and is known throughout Florida as an expert in tax problem resolution.

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