Have a hardship? Stop IRS wage garnishment. By showing economic hardship you can reduce or stop IRS wage garnishment. But, many times it is difficult to obtain a hardship determination from the IRS. For example, if you owe for a particular tax year for which the statute of limitations on collection is about to run (the IRS generally can collect on a tax debt for 10 years), IRS collection employees will seek to impose a minimum payment amount on you even if you are suffering from financial hardship.
The reason for this is that the IRS knows that in the near future, it will be prohibited by law from getting payment. In reality, the IRS will work in “reverse” and determine the amount they “need” to pay the debt before it expires. The IRS will then seek to impose that amount upon you.
IRM section 18.104.22.168.14 (Policy Statement 5-71) provides, in part: “A hardship exists if the levy action prevents the taxpayer from meeting necessary living expenses. In each case a determination must be made as to whether the levy would result in actual hardship, as distinguished from mere inconvenience to the taxpayer.”
Generally, detailed financial statement analysis is needed in order obtain “undue hardship” status. The fact is that in most cases taxpayers do not prepare the financial statement forms (e.g., Form 433-A, 433-F, etc…) properly. In many cases, important facts and circumstances are not provided by the taxpayer, because the IRS forms “didn’t ask for them”. Moreover, proper legal argument and presentation of your particular facts and circumstances is critical in order to have the IRS stop wage garnishment and bank levy.
Another problem is that the IRS will use its Allowable Living Expense “standards”, and will seek to ignore your particular facts and circumstances, as required by law.
Obtaining “currently not collectible” status merely places your account on the IRS back burner. Interest and penalties continue to accrue, and the debt grows. However, if you are suffering from undue hardship, then you need such relief. Additionally, such may, in appropriate cases, be a planning opportunity to have the statute of limitations run on a particular tax year and have the tax debt “go away”.