The IRS's state of economic distress can last up to 10 years. The IRS usually has 10 years to collect back taxes, after which it is supposed to eliminate them. You can have the status of a person with financial difficulties from the IRS for up to 10 years. Every two years, the IRS will review your current situation, specifically your income.
If your income has increased and you think you can now support yourself and your family, you can remove the status. You must start paying off your debt again. If at any point during your difficulties with the IRS you have extra money, you can make payment on your debt. The payment will not affect your condition.
To apply, in most cases, you must provide the IRS with detailed financial information (not always). You must convince the IRS that you can't pay and that forced collection would cause serious financial difficulties. There are other reasons why the IRS grants CNC status. We will gather your financial statements along with the documentary evidence necessary to demonstrate to the IRS a case of financial or personal hardship.
The difficult economic situation may stop tax collection activity during certain tax years in which the taxpayer has an obligation, but the IRS does not grant this situation lightly. The IRS examines your assets and, if there is no capital in them or if garnishing them to pay your tax obligations creates financial difficulties, you are more likely to get into a difficult economic situation. The IRS rules on difficult living conditions state that CNC codes can only be used for “individual or joint IMF evaluations, sole proprietorships, partnerships in which a general partner is personally liable, and limited liability companies in which an individual owner is identified as a responsible taxpayer.” The IRS will use the information presented on Forms 433A, 433B, or 433F to determine if the account qualifies for tax difficulties. As long as you have difficulties with the IRS, you'll be protected from IRS collection methods, such as seizing property, garnishing your paycheck, or collecting money directly from your bank account.
If you can't pay your tax bill because you only have enough money to survive after supporting your family, you may be able to get help from the IRS. If you're having trouble making ends meet and can't pay your taxes, you may be eligible for a difficult financial situation from the IRS. It's much easier to qualify for the IRS program for people with financial difficulties and they require much less personal information. Each year, as part of the IRS's economic hardship program, the government will send you an email telling you how much you owe in taxes.
If you can't pay your new taxes, you can ask the IRS to pay for financial difficulties during that tax period, but this will become more and more difficult every year. If you have a Type C Joint Stock Company, Type S Joint Stock Company, or Partnership and you believe that you meet the requirements of the IRS, you can apply by completing Form 433B. If you are an individual taxpayer and you think you qualify for financial hardship status from the IRS, you can apply by completing Forms 433A or 433F. If they find an increase in their income and believe it is within their means to pay their taxes, they will remove the CNC status and revoke the IRS obligation.