Your Hardship Letter to the IRS: Do’s and Don’ts for Currently Non Collectible

The Internal Revenue Service sometimes assesses a taxpayer’s debt ratio and affords him or her the opportunity to delay collection on the account. The IRS calls this action currently not collectible. While the government does not erase or forgive the debt, it determines that you do not have the means to pay right now. The IRS will ask you for a letter and proof of your inability to pay and will continue charging fees and interest during this period.

So what should you include in this hardship letter to the IRS? The following tips will help you draft this important piece of communication.

  1. DO include specific details about your circumstances. The IRS wants to know the reasons for your hardship. For example, maybe you were self-employed but suffered a failed business, which resulted in your failure to pay taxes. Or maybe you or your spouse suffered a medical problem or accident that curtailed your earning capacity. Provide that information to the IRS in detail, without exaggerating. Pretend like you’re a reporter and take a “just the facts, ma’am” approach.
  1. DO include documentation, including the following where applicable:
    1. Three months of copies of your wage statements
    2. Three months of copies of your bills
    3. Letters from doctors
    4. Three months of copies of your bank statements
    5. Letter from your mortgage company or landlord
    6. A copy of your most recently filed tax return
    7. Other relevant financial paperwork
  1. DO include identifying information, such as your legal name, your Social Security number, your contact information, the year the taxes pertain to and the agent name or IRS location.
  1. DO NOT forget to include form 433 as well as other appropriate forms for your situation. The government provides three forms:
    1. Form F for individuals
    2. Form A for the self-employed and
    3. Form B for businesses.
  1. DO be polite. While the IRS is a huge agency, individual collectors handle cases. They will not respond well to aggressive demands or rude language in a letter.
  1. DO NOT use vague wording. For example, do not say, “I have encountered unexpected financial problems that will likely last for the foreseeable future.” Instead, give details about those problems and estimate how long you think they will take to resolve. Use concrete numbers and timelines, not fuzzy assessments.
  1. DO NOT use emotional language. The IRS focuses on facts, dates and numbers, not on a person’s feelings.

Do you want more specific insight into how to draft your IRS hardship currently non collectible letter or more personal help working for relief, such as an IRS Offer in Compromise? Let the Highland Tax Group help. Call 720-398-6088 to schedule a thorough analysis of your tax situation, and reclaim your dignity and peace of mind.