What Qualifies as a Financial Hardship to the IRS?

Author: Tax Resolution Attorney Gwin, PLLC |

Due to a wide range of reasons, anyone can fall into economic difficulties and, thus, experience various problems associated with financial inadequacies. This also affects your ability to pay your tax bill when it is due. However, it is worthwhile to note that the IRS has its way of determining what financial hardship means. Therefore, this article will clarify what qualifies as a financial hardship to the IRS.

What is a financial hardship to the IRS?
According to the IRS, financial hardship refers to a situation in which a taxpayer is unable to take care of their allowable living expenses. As a result of this, such a taxpayer doesn’t have money to settle their delinquent tax.

Based on what qualifies as a financial hardship to the IRS, every taxpayer must understand what is considered as allowable living expenses.

In simple terms, allowable living expenses are known as the expenses that are important for the welfare and health of a taxpayer and their family. By national standards, the following are considered as the vital expenses for the welfare and health of anyone:

  • Food – home and outside
  • Personal care services and products – products for oral hygiene and cosmetics, medical expenses, appliances, and so on.
  • Housekeeping items – household products, stationery, and supplies for cleaning, etc.
  • Apparel and services – clothing, jewelry, shoes, dry cleaning, watches, and lots more.
  • Miscellaneous – transportation, school supplies, card payments, and other important expenses that don’t fall into the other categories.

If you cannot meet all your needs for these allowable living expenses, the IRS can consider you to be in financial hardship. Nonetheless, it is crucial to realize that you have to show proof of having a financial crisis before getting any form of assistance from the IRS concerning your tax bills.

Special circumstances for a financial hardship
To have a hardship status and qualify to get some hardship assistance, you must be in one or more of some special circumstances. These special circumstances include:

  • Death in the family has led to extra expenses, income loss, and other financial challenges
  • Increase in the number of dependents
  • Employment issues such as job loss, industry recession, etc.
  • Advanced age with an increase in living expenses and a decline in income
  • Psychological and physical health problems such as disabilities
  • Casualty loss with financial implication e.g. storm, fire, flood, and auto accident
  • Business losses, stock market losses, bankruptcy, etc.
  • Child rearing, special education needs, and pregnancy that may force a spouse to stop working
  • Addictions to drug, alcohol, and gambling that cause financial problems
  • Retirement without means of getting sufficient money for living expenses

What assistance can you get from the IRS?
The main job of the IRS is to guarantee that every working individual pays their tax bills. So, if the IRS qualifies you as someone in financial hardship, here are the assistance you can get from the IRS:

  • You can get a reduction in your tax debt
  • You can be offered more time to complete tax payments without any IRS collection actions

So, if you think you are experiencing financial hardship, consider filing your tax return and hardship. Also, provide proof of your financial hardship and wait for the IRS to determine whether you qualify or not.

Requesting for hardship assistance from the IRS can be sometimes difficult. Therefore, you need to help of the tax experts at Tax Resolution Attorney to find the perfect resolution to the problem.