Financial hardship refers to a situation where a taxpayer cannot pay their tax debt without sacrificing basic living expenses, such as housing, utilities, and food. When taxpayers experience financial hardship, the IRS may grant relief by suspending collection actions or offering more manageable repayment options.
The IRS offers several relief options for those facing financial hardship, including:
- Currently Not Collectible (CNC) status: Temporarily halts IRS collection efforts.
- Offer in Compromise (OIC): Allows taxpayers to settle their debt for less than the full amount owed based on their ability to pay.
- Installment Agreements: Tailored payment plans that take the taxpayer’s financial situation into account.
Taxpayers must provide detailed financial information to demonstrate hardship, often using Form 433-A or Form 433-F. These relief options help individuals manage tax debt without experiencing severe financial consequences, such as losing housing or the inability to pay for basic necessities.