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Dealing With IRS Collections During a Financial Hardship

CDP

If you’re already having financial problems, IRS collection actions can make your situation even more difficult. Fortunately, the IRS will consider your financial issues if you ask for a collection alternative.

Request a CDP Hearing

The IRS won’t know about your financial hardship unless you tell them. If your assets are about to be seized, you should make sure you request a Collection Due Process (CDP) hearing to explain your situation.

The IRS is usually required to send a Notice of Intent to Levy in the mail before your assets can be seized. You have 30 days to respond to this notice and request a CDP hearing. At the hearing, you can propose collection alternatives, and the IRS won’t levy your assets until the CDP process is complete.

Make sure you read every IRS notice you get and pay careful attention to any deadlines mentioned in the notice.

Collection Alternatives

Currently not collectible (CNC) status may be a good option if your financial problems are just temporary. The IRS will agree not seize your assets or wages as long as your account is in CNC status, which gives you some time to get your finances in order.

However, CNC is not a permanent tax debt settlement solution. If your financial hardship may be permanent, you may want to consider an Offer in Compromise (OIC).

OICs are tax debt settlement offers. The IRS calculates the minimum amount they will accept based on your disposable income and equity in assets. You must not be able to make monthly payments in order to qualify.

If you can afford to make monthly payments, an IRS installment agreement may be a better choice. In some cases, you can negotiate a partial payment installment agreement that forgives some of your debt, but these are harder to get than a regular installment agreement.

Other Collection Actions

The IRS can still take other collection actions, even when you are experiencing a financial hardship:

  • Your federal and state tax refunds can be seized and applied to your tax debt. You may want to adjust your withholding or estimated tax payments if you generally receive a large refund.
  • A Notice of Federal Tax Lien can be filed against your property.
  • If you owe over $52,000 and meet other conditions, the IRS can notify the State Department, which may result in a passport revocation or denial.

Get Help

Contact a tax attorney if you need help avoiding an IRS collection action and are experiencing a financial hardship. Get free, no-obligation, tax advice from a Michigan tax resolution attorney by calling Ayar Law at 800.571.7175 today.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.