Filing for Hardship with the IRS and Being Declared Uncollectible

hardship filingIf you would like to file for hardship and get the IRS off your back for a minimum of six months and possible up to a few years you will need to meet requirements for IRS hardship. Once you have determined you are a likely candidate for being declared uncollectible or status 53, you will be required to to file detailed financial information about yourself with the IRS. The IRS does not grant uncollectible status lightly. You will need to thoroughly convince the IRS that you do indeed qualify for this treatment and if they were to collect it would create severe economic hardship.

If you have been working with a tax collector, you can ask the collector to file 53 on your case. This means to have him file IRS form 53 (only a collector or IRS official can do this). If the collector knows your situation well, he could possibly do this for you and you will not need to file detailed financial paper work. However, it is unlikely for him to grant this request without you filling out more IRS forms detailing your financial situation even more.

In order to receive uncollectible status with the IRS you will need to prepare IRS Form 433-A (433-B for businesses, or both if filing for both) extremely accurately and truthfully. Form 433-A is called the "Collection Information Statement for Wage Earners and Self-Employed Individuals." This is the form that the IRS will use to determine your collection potential - which means that the IRS will determine from this form if it would be better to go ahead and collect from you or to let you have some time to improve your financial standing before collecting.

Here are some common documents that you will need when filling out this form (you will need to provide copies to the IRS as well):

  • Personal Information (SSN, dependents, phone, address, housing arrangements etc.)
  • Employment Information (employer, pay stubs, work number, how long, occupation etc)
  • Other Income (pensions, annuities, social security, child support, alimony, investment income etc.)
  • Bank and Financial Information (checking account, liquid assets, investment accounts, credit card accounts, insurance policies etc)
  • Information on any legal proceedings
  • Copy of monthly bills (three months worth), which can include:
    • Food
    • Housing (Rent/Mortgage, Taxes, etc.)
    • Apparel and Services
    • Transportation Costs
    • Utility Costs
    • Personal Care
    • Medical Expenses
  • If disabled, you need to show proof, such as hospital bills or government records
  • Copies of last tax return (IRS Form 1040, 1040A or 1040EZ)

Proving financial hardship is not easy, but it can be done if you do meet the requirements. It is a good idea to check with a tax professional before trying to file for this on your own. A tax professional can make a determination if declaring hardship would be the best choice for you. One thing to keep in mind is that being classified as currently not collectible will not solve your IRS problems, it will only buy you more time to find a permanent solution.