An economic difficulty occurs when we have determined that the tax prevents you from covering basic and reasonable living expenses. For the IRS to determine if a lien is causing economic hardship, it will generally need you to provide us with financial information, so be prepared to provide it to you when you call. We will gather your financial statements along with the documentary evidence necessary to demonstrate to the IRS a case of financial or personal hardship. If you're facing financial difficulties from the IRS, the best thing to do is to hire a professional tax advocate for those difficulties.
You must convince the IRS that you can't pay and that forced collection would cause serious financial difficulties. If you are an individual taxpayer and believe you qualify for financial hardship status from the IRS, you can apply by completing Form 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. 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 situation of financial difficulty.
It's much easier to qualify for these programs than the IRS for people with economic difficulties and they require much less personal information. The IRS can accept that you are having financial difficulties (economic difficulties) if you can show that you can't pay or can barely afford your basic living expenses. 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. The IRS will use the information presented on Forms 433A, 433B, or 433F to determine if the account qualifies for tax difficulties.
If you owe back taxes and are unable to pay them because of your current economic situation, you may be eligible for economic hardship status from the IRS, technically known as a currently non-taxable state. The IRS will review taxpayer information every two years to ensure that they still qualify for tax difficulties. The IRS rules on economic hardship state that CNC codes can only be used for “individual or joint IMF assessments”, sole proprietorships, partnerships where a general partner is personally liable, and limited liability companies where an individual owner is identified as a responsible taxpayer. If possible, it is best to pay the new taxes promptly, as they are not likely to affect the difficulties suffered by the IRS over the past few years and will avoid incurring new debts.
If you have a C corporation, an S corporation, or a partnership and you think you qualify for economic hardship status from the IRS, you can apply by completing Form 433B.
