Can't Pay: Many of you would pay the IRS...if you could. But times are tough. Jobs are being lost. One thing lead to another, and now you can't afford to pay the IRS. For taxpayers in this situation, there's a little known secret.
Hardship Status: Hardship status is for people who cannot pay on their IRS debt without sacrificing their basic needs. The IRS will compare your monthly gross income versus what they consider your “allowable expenses” to determine if you qualify for this program. If you qualify, collection efforts may be extended for up to 1 year.
Basic Needs? Basic needs or “allowable expenses” includes food, housing, clothing, transportation, medical expenses, and insurance. The IRS will not count any luxury expenses as basic needs. So don't try to include the price for weekly lawn maintenance (The IRS wants you to mow your own lawn), or even the price of private school for your kids. The amount of money you can spend on your basic needs are national standards, which the IRS updates every year.
Qualify? If paying the IRS will make you go without basic needs, you may qualify for Hardship Status. How do you apply for it? First, you fill out Form 433A. The IRS will use this form to figure out your financial situation and see if you apply.
Don't Party Yet: It's not over yet. The IRS Hardship Plan does not suspend collections forever. After the grace period given to you has expired, collections efforts will resume full force. Plus, the IRS will check up on your every couple of months to see if you still qualify for the hardship plan. If your income has changed, the IRS might expect you to pay on your IRS debt.
Criminal Charges: Do not lie on Form 433A in any way to achieve Hardship status. When the IRS finds out, you'll face severe penalties and/or criminal charges. If you are unsure about anything you put on your form, contact a professional that will help you. Don't go to jail just to skip out on your debt for a few months!