Financial-Hardship Relief

You probably didn’t get in this situation simply because you didn’t want to pay your taxes. Like most people, you’re probably aware of the formidable power the IRS and state tax agencies have to levy your assets, garnish your income, and record liens. Like most people, you probably find yourself in this situation because you cannot pay.

You may be able to satisfy your tax debt by making payments in an installment agreement. If you qualify for an installation agreement, the IRS Help Attorneys at The Law Office of Beverly Winstead, LLC can help you strategically negotiate one that fits your needs.

But even if you cannot make payments through an installation agreement, perhaps because you are unable to work due to injury, illness, or caring for a loved one, you may still have options available. If your loss of income is temporary, and you have no other assets or means to pay your tax obligation, you may qualify for financial-hardship relief, which the IRS also calls currently not collectible or CNC.

Procedure for Qualifying. You will likely qualify as currently not collectible if you have no assets or income out of which to pay the debt, and IRS collection efforts would prevent you from paying living expenses. The IRS uses this hardship definition to determine  if  you should be relieved from IRS enforcement action:

• You cannot pay reasonable and necessary living expenses;
• You have no equity in assets and insufficient income for any payment without hardship;
• Enforcing collection would cause you hardship

Does Hardship Make Sense for You? Just because you can qualify for financial hardship does not mean it’s the best plan for you. The downside to being granted financial-hardship status is that your tax obligation does not go away, and you will continue to accumulate penalties and interest. This means that the amount you owe will actually increase. While the IRS will not seize assets or garnish wages of taxpayers who are in financial-hardship status, the IRS may, and very likely will, place liens on homes, vehicles, or other assets to keep you from selling or disposing of your assets. 

Financial-hardship status can still make necessary good sense for someone who needs protection from IRS enforcement action and who needs their assets in order to live. But financial hardship status is merely a pause on the debt; it doesn’t erase it.

Running Out the Clock. All of that said, there is a potentially huge advantage of receiving financial hardship status: it might allow you to run out the clock on your debt.  IRS tax obligations generally last for only ten years, after which a statute of limitations bars the IRS from collecting on your tax obligation, and the clock generally continues to run during your period with financial-hardship status. What this means is that if the hardship lasts for those ten years, the IRS may not be able to collect the debt at all. Hardship is no fun. No one wants hardship simply to be able to avoid a tax obligation. But taxpayers suffering financial hardship may be able to run out the clock on a tax debt.

These and other reasons are why you need to speak with an attorney who understands state and federal tax law and who can advise you on the best course of action for your situation. Beverly Winstead is well-known for her tax expertise,  but she’s also known for her commitment to her clients.

Not only did she graduate from the University of Maryland School of Law, but she is also the former director of the University’s Low-Income Tax Clinic. She knows how to provide customized legal services for clients’ personal and business needs. She and the IRS Help Attorneys at The Law Office of Beverly Winstead, LLC have a reputation for focusing on their clients’ needs, including qualifying for financial hardship. Call today at (301) 306-1234 or contact the firm online to learn whether you qualify for financial hardship relief.

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