Hardship Statuts aka “Currently Not Collectible”

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Darrin Mish: Hardship status, also known as ‘Currently Not Collectible’. The hardship status is not exactly a solution to an IRS problem, in and of itself. But it can be very helpful, and it can be a solution in certain circumstances, and I’ll explain that in a little bit. My name’s Darrin Mish, and I’m an attorney in Tampa, Florida whose practice revolves around the resolution of IRS problems. It’s all we do at my firm. I know that we’ve done it for many years, and we’ve gotten pretty good at it. You might be watching this video on my website. My website is at www.getirshelp.com, and our phone number is 888 438 6474, that’s 888 GET MISH.

Now ‘Currently Not Collectible’, or hardship status, is a situation when the IRS agrees that you have no ability to pay. In other words, after they’ve done a financial analysis or looked at your collection information statement, they agree that you have the ability to pay zero or less than zero. Technically, what they agree is that to cause you to pay anything at all would constitute what is known as an economic hardship.

Now you might ask, what does economic hardship mean? Is that just fancy lawyer talk? Well in a way it is, so let me explain what it is. Economic hardship means that you have no ability to pay anything without having a problem paying for life’s basic necessities: things like food, clothing, shelter, medical care, transportation, and things of that nature. And so, if you have no ability to pay anything to the IRS on a monthly basis, or you would be facing an economic hardship, then there’s a good chance that you’re what is known as ‘Currently Not Collectible’.

Now the IRS has to agree that you have no ability to pay. It can’t just be you indicating that you don’t have any ability to pay, and you have to prove it. Just like everything in the IRS business, you’re going to have to go ahead and prove this. How are you going to prove it? Well they’re going to ask you to provide certain documentation. One of those documents is going to be a 433 A, a collection information statement for individuals and/or self employed people, or a 433 B, if you’re a business.

Now when I say a business, I mean you’re a corporation or you’re a limited liability company. And when I say self employed, I mean you’re a sole proprietorship, which means you have taken no formal, extra efforts to formalize your business, other than just hanging out your shingle as “Bob’s Bar & Grill”, or what have you.

You’re also going to have to provide three months worth of documentation proving your expenses and your income. And most of you are going to be dealing with what’s known as the Automated Collection System, which are the toll free numbers with the very nice people who are going to be talking to you about what you can afford to pay. And if you’re dealing with the Automated Collection System, you’ll need to use the Form 433 F.

Why does ACS use the 433 F and the rest of the IRS uses the 433 A and 433 B? I don’t know. I have no clue. It’s just the way it is. They’re the only part of the IRS that uses the 433 F. No one else in the service will accept it. And likewise, the ACS will not accept a Form 433 A, so don’t even try it’s not worth it. You’re also going to usually require an explanation of what your hardship is, what your problem is, and why you can’t afford to pay in some way, shape, or form. And it could be something as simple as I’m just not making enough money, the economy’s down, or what have you.

If the IRS agrees to place you in hardship status, it’s usually going to be something between 12 24 months. There’s actually two different ways that they can do this. They can put you into hardship status for an indefinite period of time, or a definite period of time.

Now let me explain the difference because it seems like they’re contradictory, but they’re really not. And they won’t tell you which one of those two they’re going to do, but they have two ways of doing it. They can actually tie it to your adjusted gross income and say, “Well, if Mr. Jones makes more than $40,000 adjusted gross income in any year, then he needs to come out for a review, and we’ll see if he has an ability to pay at that time.” That’s what I call an indefinite CNC, or an indefinite ‘Currently Not Collectible’ status. And the other would be, they would set it up through a timing mechanism, “After 16 months, Mr. Jones’ case needs to come back out, and he needs to come up for review.”

Now it’s interesting to note and you need to know this that you will not be told when you come out of ‘Currently Not Collectible’ status. What will happen is you will just come out of it, and you’ll start to get collection notices again, and that will be your clue that you’ve come out of ‘Currently Not Collectible’ status. There’s one exception to the collection notices issue. That is, by law, every year, you’re going to get an annual statement for each tax liability.

So if you owe for eight separate years, you’re going to get eight annual statements. They’re only going to come out once a year. And you might recognize them as annual statements because they’re not particularly threatening. They say something like, “You owe us this money, and you really should pay it. And if you have the money, you should go ahead and send it to us”, as opposed to your typical IRS collection notice, which is something short of, “If you pay us, we’re going to take all your kids, burn your house down, and let all your livestock loose.” So you can tell the difference between the two statements like that.

There’s one last thing that I wanted to throw in; it’s kind of a funny little thing. If you really want to freak out an IRS person tell them that you want ‘Status 53’. It means hardship. It has to do with the computer screen that they’re looking at when they put you in that status. It’s a cheap little trick, and it’s something that’s fun to do. It’s not going to hurt you at all, but they’ll think that you really know what you’re talking about.

So if you are in need of having your IRS problems solved, then I encourage you to give us a call. We represent clients nationally and internationally. So if you’re not in Tampa, but you’re in Toledo, Ohio, or you’re in Timbuktu, we want to talk to you. Give us a call toll free 888 GET MISH (888 438 6474). Check out our website at www.getirshelp.com, or you can contact us by email at contactus@getirshelp.com. I’m Darrin Mish. Thanks.

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