Did you know that IRS will release a wage levy or bank account seizure if you can prove that you’re experiencing financial hardship?
It’s true – IRS will not levy if the action causes a financial hardship that prevents maintenance of a family’s health and welfare.
What constitutes financial hardship with IRS?
If you have very little in assets or savings and only have enough income to support your family’s health and welfare, you may ask IRS for financial hardship status. IRS refers to this as Currently Non-Collectible.
Once the Currently Non-Collectible status is granted, all IRS forced collection tactics will be halted until the financial hardship is over. This applies to wage levy and bank account seizures, among other forced collection tactics.
What happens to your tax debt when granted currently Non-Collectible Status?
Being Currently Not Collectible does not mean your debt disappears. It means the IRS has determined you cannot afford to pay the debt at this time. The tax debt you owe the IRS still exists, and penalties and interest continue to increase.
For those experiencing a financial hardship, halting the forced collection offers much peace of mind while working to regain a stronger financial position.
How long do I have to claim financial hardship?
In the case of a bank account seizure, you have 21 days from the date IRS sends a levy notice to your bank to prove financial hardship. If your claim of financial hardship is successful, IRS will release the levy and you get to keep the money.
To do this, IRS will need a completed and signed “Collection Information Statement,” wherein you will show all of your assets, liabilities, income and expenses. If the collection information statement shows you have less than one month’s worth of expenses in the bank AND all of your income is used up paying regular and necessary expenses, it is likely that you qualify for the hardship status.
Are there limitations to claiming financial hardship?
Now, you cannot claim outrageous expenses. The expenses you claim in your attempt to be granted this status are limited to IRS Collection Financial Standards and depend on the number of people living in your household.
IRS has a 5-minute video that explains briefly how to calculate the allowable monthly expense posted here. Click on the video titled “Monthly Household and Expenses – Section 7.”
If the calculation shows your monthly allowable expenses exceed income, then you qualify to request financial hardship status – Currently Non-Collectible. The hardship status is reviewed every year or two and will be extended for as long as the hardship exists.
The Collection Information Statement is quite detailed, so you may have questions arise while completing it. Even if the calculation is close, there may be nuances and adjustments you can use to push it over the edge.
In either case, reach out to Tax Crisis Rescue for help. We have completed hundreds of Collection Information Statements over the years and would be glad to work with you too!
You can schedule a free 40-minute consultation to discuss your specific situation and evaluate your options. Click here for the online calendar and to schedule a convenient time.
