Form 433F Collection Information Statement and Hardship

[Steve Stang]

Does anyone have experience with this form? I have a client who has gone through the ringer (emotionally and financially) over the past two years with the death of her parents who she cared for, the dissolution of a long-term relationship, the loss of a home and the strain of all this resulting in no earned income in her self-employed business.

She has an installment agreement in place with the IRS and MA DOR but is unable to make the payments because of her lack of income and the life events noted. She was told by IRS and DOR to petition and request a change due to hardship.

She's living with a friend who has kindly taken her in providing shelter, food and paying her bills. The form asks about what she pays for expenses but she's not paying any. Should she list an amount for 'rent' that her friend should be collecting?

I suggested that she indicate that she's paying nothing now and provide a written explanation. I guess she can include the amounts for insurance and credit card minimums that are just accruing (she has no resources to pay them and her friend is only so generous). She has no liquid assets, has credit card balances and could be a candidate for bankruptcy - if she had the money to file. She owns a single family she bought last year for cash as an investment (value of $50k maybe) to flip but that didn't happen. That's her only asset.

Will she likely be a candidate for a hardship change in the installment plan? Is there anything that I should know? BTW - all taxes are filed - still working on 2013.

[DaveinTexas]

433f

How much does the client owe? I'm just curious. If your client can pay the entire balance within 6 years, there is no need for the financial statement. I'll assume she cannot.

Also, are you trying to get your client into CNC (Currently Not Collectible) Status? If so, you need to demonstrate that the client has no residual income after the allowable living expenses are applied. See the IRS Collection Standards for more information. Here's the link: http://www.irs.gov/Individuals/Colle...cial-Standards

Some of the standards (like food, clothing, misc and medical expenses) are allowed to offset the client's reasonable collection potential (RCP) without questioning the actual out of pocket expenses the client incurs.

Also, your client's situation is complicated a bit due to the fact that she does not provide for her own living expenses. The IRS will allow the offset of the lesser of what she pays or the national standards. However, she probably has to keep up the property tax and insurance payments on the home she purchased.

The bottom line is if she is earning little or no income from her main source of employment (self employment), she needs to fill out the form and contact the IRS immediately. If you feel charitable, you can contact the IRS PPS line to explain the situation. I have had success with clients being placed in CNC status over the phone with no 433F filled out. Granted these clients had very little income (Social Security) but it sounds like your client may fit the bill. If the IRS agrees to place her in CNC, they will cease collection activity but occasionally check in on her to determine if her financial situation has improved (at least once every 2 years). They may place a lien on her property if her tax balance warrants it.

As for MA DOR, I am not sure if they have a similar program but I am sure if your client can demonstrate her inability to pay the IRS, then I assume the DOR would offer some leeway.

Good luck and keep us posted. Maybe some others can offer some supplemental advice as well. I hope this woman's life turns around and she gets a break.