What is the IRS hardship program?

There’s a way for taxpayers to temporarily suspend their tax debt

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People facing financial hardship may have difficulty paying their taxes. The IRS hardship program is for taxpayers who have little to no money after paying their basic living expenses and are unable to pay their tax debt. With this program, known as currently not collectible (CNC), the IRS deems that a taxpayer can’t pay the taxes they owe.


Key insights

  • The IRS hardship program is available to taxpayers who can prove they don't have enough money to pay their tax debt.
  • The IRS establishes a standard of the costs of living expenses, which may not be reflective of your actual living expenses.
  • If you are granted hardship status, taxes owed will be temporarily paused while accruing interests and penalties.
  • Hardship status is temporary, and the IRS will review your case periodically to see if your financial situation changes.

What is CNC status?

The IRS hardship program is for people who are struggling financially and don't have money to pay their tax bills. There are requirements taxpayers must meet to be considered. You need to show that you have little or no money left after paying living expenses, such as rent, groceries and utilities.

However, if the IRS grants you CNC status, the debt doesn't disappear. You'll still owe the money when your financial situation improves, along with interest and late penalties.

Who qualifies for a CNC?

A taxpayer experiencing financial hardship and struggling to pay essential living expenses can apply for the IRS hardship program. The IRS sets amounts for basic living expenses. It's possible that you may have a basic living expense that costs more than what the IRS considers standard.

According to Logan Allec, the founder of Choice Tax Relief, "If the IRS determines that the standard housing expense for your county and family size is only $2,000 per month, but you pay $3,000 per month in housing expenses, the IRS will generally only let you consider $2,000 of housing expenses in proving to them your hardship case."

» MORE: Best tax software and services

How to apply for the IRS hardship program

Applying for CNC status is typically done by calling the IRS. You'll have to provide income and expense information and documentation. Here’s what you’ll need:

  • Personal asset information with documentation: This includes information for all bank accounts, investments, credit cards and property, including real estate and vehicles.
  • All of your income: Provide your wages, interests and dividends.
  • Monthly essential living expenses: These include rent or mortgage, utilities, food, clothing, vehicle costs, public transportation and health insurance.
  • Form 433-A, Form 433-B or Form 433-F: These forms are known as Collection Information Statements and are used to determine how you can satisfy an outstanding tax liability.

What happens after you're granted the IRS hardship program?

The IRS temporarily suspends taxes owed when the IRS grants a taxpayer IRS hardship. The IRS will charge interest and penalties while you’re unable to pay. "The IRS will stop any forced collection activity against you as long as you remain in hardship status," said Allec. "This means that the IRS is not allowed to levy your wages or garnish your bank account."

How to maintain your status for the IRS hardship program

Once CNC status is granted, it's important to continue to comply with all tax laws.

As a government agency, the IRS wants to protect itself by ensuring it gets paid money owed. The IRS can file a Notice of Federal Tax Lien (NFTL), a claim against assets that will appear in public records. "If you get into hardship status, then the IRS files a Notice of Federal Tax Lien, and then you sell your home that has hundreds of thousands of dollars in equity in it, the IRS will get ‘first dibs’ on your proceeds (up to the lien amount). You get the rest," explained Allec. Typically, the IRS places a tax lien when the balance owed is $10,000 or more.

The IRS will check your financial situation annually to see if it has improved and you're able to pay the taxes you owe. If the IRS has questions or needs additional documentation, respond quickly and provide the requested information.

The IRS can try to collect taxes for up to 10 years from the date they were assessed. However, the agency can suspend this period in some situations, extending the time it has to collect.

» MORE: What is a tax lien?

Owe the IRS thousands? See if you qualify for relief.

    FAQ

    What documents do I need to provide when applying for CNC status?

    You need to include documents related to all your income, living expenses, assets and investments.

    How long does it take for the IRS to respond to an application for CNC status?

    The wait time to hear from the IRS varies according to each individual’s circumstances. When you call the IRS to apply, you should ask about the timeline for hearing back.

    What happens if my application for the IRS hardship program is rejected?

    If the IRS rejects your application for the hardship program, you can request a conference with the IRS collection manager. According to the Taxpayer Advocate Service, an independent organization within the IRS, there is no right to appeal a denial of a request for CNC status.

    Do I need a tax professional to apply for a CNC?

    No, you can apply for CNC status on your own. If you prefer, you can also speak with a tax professional.

    Bottom line

    If you’re struggling to afford basic living expenses and don't have money to pay your tax debts, the IRS hardship program is a potential option. However, the IRS sets its own rates of what the cost of living is. Keep in mind that people granted hardship status still owe taxes. The IRS will apply interest and penalties while the tax debt is on a temporary hold.


    Article sources
    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. IRS, “The IRS Collection Process.” Accessed Feb. 13, 2024.
    2. IRS, “Temporarily Delay the Collection Process.” Accessed Feb. 13, 2024.
    3. IRS, “ 5.16.1 Currently Not Collectible.” Accessed Feb. 14, 2024.
    4. IRS, “How to prepare a Collection Information Statement (Form 433-A).” Accessed Feb. 14, 2024.
    5. Taxpayer Advocate Service, “Currently Not Collectible.” Accessed March 5, 2024.
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