IRS Hardship: Getting Put on Uncollectible Status
Sometimes taxpayers come across unforeseen financial events and it puts them in a situation where they are simply not able to pay the IRS the taxes that are owed. The IRS understands that this happens and has the power to declare an individual uncollectible if they can prove to the IRS that the collection of the tax would cause financial hardship. This is also called status 53. Once the IRS approves, then this will temporarily stop collections. The IRS will check on your financial situation later to see if your financial situation changed or improved enough in order to start collections again. This status won’t solve your tax problem unless you expect your financial situation not to change in the future. In some cases, some individuals can avoid paying taxes owed because the Collection Statute Expiration Date (CSED) for the tax years in question expire.
How to be Declared Uncollectible by Proving Financial Hardship to IRS
The IRS declares individuals uncollectible on a case-by-case basis. They evaluate individuals to see if the enforced collection of taxes from them would create economic hardship. In order to pursue this resolution, you may be required to submit some IRS forms and lots of personal financial information to the IRS outlining your financial situation.
Filing for Hardship with the IRS and Being Declared Uncollectible
When filing for the currently uncollectible status you will be required to fill out detailed IRS forms as well as provide detailed information about your financial situation. It is important to provide the IRS with enough information to prove that you do not have the means to pay taxes owed and it would be in their benefit to stop collections and allow you more time.
Extension of Time for Payment Due to Undue Hardship
The IRS may allow more time to pay without charging late payment penalties if you qualify for an extension of payment due to undue financial hardship. You can use IRS form 1127 to request more time to pay your taxes. You will need to attach information about your assets, liabilities, income, and expenses that provide evidence that paying that tax would cause you undue hardship.
Hardship/Uncollectible Status Frequently Asked Questions
Questions and answers to commonly asked questions about IRS hardship status.