IRS Hardship: Frequently Asked Questions (FAQs)
What are other names for IRS hardship status?
There are many different names for IRS hardship, but they all mean the same thing. The various names include IRS uncollectible status, status 53, currently not collectible, and CNC status.
Does a CNC or currently not collectible extend the statute of limitations on IRS collections?
The statute of limitations (SOL) on collections is the date the IRS can no longer legally collect. If you are declared currently not collectible, that does not change the SOL. However, if you file bankruptcy, file for an offer in compromise, among other things, this “tolls” the statute of limitations on collection. Remember, interest and penalties continue to accrue while a taxpayer has a CNC status.
What expenses does the IRS allow if you file for hardship status?
To determine if you qualify for hardship status, the IRS looks at your income, expenses, and assets. The agency considers a certain amount of regular monthly costs. Mainly, if you are spending more than these amounts, the IRS expects you to reduce your bills and pay down your taxes. Otherwise, in some instances, you can ask for an exception.
National Standards: Food, Clothing & More (2022) for One Person Example
- $431 for food
- $99 for apparel and service
- $40 for housekeeping supplies
- $45 for personal care and services
- $170 for miscellaneous expenses
- You can get more details from the IRS.gov website.
National Standards: Out of Pocket Health Care Expenses (2022)
- $75 for persons under 65 years old and $153 for people $65 and older
The national standards vary based on the number of people in your family. You can learn more here. The IRS uses local Collection Financial Standards for transportation costs, housing expenses, and utility bills.
Local Standards (2022)
Local standards include monthly allotments for housing, utilities, and transportation operating costs by region. In other words, the IRS determines allowable expenses based on where you live in the country. The IRS determines housing and utilities at the county level, whereas the IRS sets car operation costs at the regional level (discussed in more detail in a question below).
- Monthly allowance for the operation of cars based by region of the country
- Monthly allowance for housing and utilities set at the county level
What transportation costs does the IRS allow with hardship status?
For transportation costs, the IRS assumes that you spend $224 a month on public transportation, but if you have a car, the agency uses different numbers. If you own a car and take public transport as well, you may claim both expenses if you can prove them necessary.
Allowed ownership costs, set at the national level, are $521 for one car and $1,042 for two vehicles. On top of that, you can also include operating costs based on where you live. For example, as of 2020, the IRS permits taxpayers in New York $319 per vehicle in operating expenses (638 for two) but only $178 for taxpayers in the Minneapolis-St. Paul region (one car). Usually, the IRS allows one car per person. To learn more, check out the IRS’s page on transportation allowances.
What are the IRS’s housing and utility allowances?
When determining what you need to spend on housing and utilities, the IRS uses different numbers based on where you live. The IRS set at the county level, and they vary a lot.
For example, if you are a family of five living in Westchester County, New York, the IRS expects you to spend $4,387 per month on housing and utilities. In contrast, if your family of five is living in St. Lucie County, Florida, the IRS permits $1,982 on housing and utilities.
Is there a specific form to file for IRS Hardship?
No, there is not a specific form to file for hardship. You can read more about it here. You need to work with the IRS directly or leverage a tax professional to apply for uncollectible status. To be considered, you may have to fill out IRS Form 433-F (standard form for most taxpayers), Form 433-A (usually revenue officers request this), or IRS Form 433-B (business) among other requirements. These forms require detailed information about your assets, liabilities, monthly income and expenses.
If I am declared currently not collectible, do I ever have to pay the IRS?
Yes, you are still required to pay the IRS. Uncollectible status is temporary and generally applies to each year you owe. The IRS checks your tax returns every two years to see if your situation changes. If you remain uncollectible until the tax owed expires, you do not have to pay. Therefore, CNC status works for taxpayers in retirement or who don’t expect their income to change drastically.
Are there other options I should consider before trying to be declared uncollectible?
Yes, you should consider other options before pursuing uncollectible status. CNC status or IRS hardship usually comes with a tax lien. That is the IRS’s legal claim to your assets. It can appear on your credit report and makes it very difficult to borrow money.
If you can afford to make a small payment, you may want to apply for an installment agreement instead. If you are in need of a short-term extension on your payment, you may qualify for an extension of time for payment due to undue hardship. To apply for this, use IRS form 1127 and submit it to the IRS with the supporting documents. Alternatively, you may look into an offer in compromise. An OIC is where you settle the tax you owe for less. When in doubt, request a free consultation with a tax professional to get an idea as to your best course of action.