The Internal Revenue Services (IRS) and the State of California Franchise Tax Board have Hardship or Currently Not Collectable programs that allow qualified tax payers to pay $0, yes I mean ZERO in back taxes.
What is a Hardship for the IRS?
A Hardship status is a condition where the IRS or CA Franchise Tax Board (FTB) agrees that it is not reasonable to expect a taxpayer to make payments given their current financial situation. Once it is proven that a taxpayer qualifies for a hardship status their account is placed on hold for at least two years; this will also stop all active collection activity. Many clients will stay in that status until the tax debts do expire – and yes, they expire with time.
Do I qualify to pay zero on my taxes?
Do you qualify just because you have your hours cut, a spouse is laid off, or you cannot afford to put your children through college? None of these reasons in and of themselves will qualify you for a hardship status. A review of your current financial situation based IRS and California FTB guidelines is required, often with proof of expenses and income. Our skilled tax debt resolution attorneys from our offices in Sacramento and Folsom will help determine if you qualify.
How Long will I stay in a Hardship and Currently Not Collectable Status?
Being deemed as Currently Not Collectable will allow you to remain in Hardship status for at least two years; as long as you do not owe the same government agency again and file all required tax returns. For example, if you are placed in a Hardship status – and then owe again the next year you will NOT stay in a Hardship status. It is very important to file your taxes on time in the future and not owe again. If you do owe again you will have to repeat the process again, which can cost time and money.
After two years the IRS or CA FTB can always review your account but most tax accounts will stay in the same hardship status as long as you file your taxes on time, do not owe again, and your income does not increase significantly. If you win the lottery the IRS or CA FTB will want their money!
Why should I care about getting into a Hardship status if I cannot pay anyway?
One advantage is that once you are in a Hardship status you can work without worrying about having your wages garnished and taken, your bank accounts cleared out, or your assets seized (which is rare). Mostly though, once you set up a resolution on your case the interest rate charged to your debt drops substantially. If your income goes up and you do have the income to start paying it is much better to have been accruing interest between 4-10% rather than as high as 30% when your account is in active collections. EVEN IF YOU ARE NOT PAYING – IT WILL SAVE YOU MONEY IN THE LONG TERM.
Sacramento Tax Debt Resolution Attorneys
The experienced tax debt lawyers of Bowman & Associates help clients across California from our offices in Sacramento and Folsom. If you or someone you know has legal questions regarding applying for a Currently Not Collectable and Hardship status, contact our law firm for a free case evaluation. We have helped hundreds of clients shrink their tax debt and we can help you.
