The proof required to show you are uncollectible & can't pay so the IRS should cease active collection will be revealed with the Form 433F or Form 433A (& the supporting documentation). This takes a lot of work. Essentially, the IRS subtracts your allowable expenses from your net income and asks you to pay the difference.
Here are the various Forms used by the IRS to ascertain how much you can pay:
- - Collection Information Statement Individuals (short form)
- - Collection Information Statement Individuals (long form)
- - Collection Information Statement Businesses
With wage earners the income is easily ascertainable from recent pay stubs. Self-employed taxpayers will have to reveal their business income and expenses to arrive at Net Business Income, which can be more difficult.
For self-employed taxpayers, you can use Quickbooks or whatever program you are using to compute your current year tax obligation (Form 1040X). Also, TaxHelp has a series of Webinars to help you properly construct these forms so you are not rejected.
The IRS only allows you certain expenses so you will have to build your case with solid evidence. Get the actual invoices or billings for all the expenses and divide them into the proper categories. Then, place them in chronological order. Next, get copies of all the payments and match them with the billings with a total tape on top so the IRS can easily trace your expenditures.
It helps if you can present any medical or physical ailments to show the IRS your difficulties. Gather all the medical reports from your doctors and get any recent medical billings as expenses on the Form 433. The medical reports can also be used to make a Penalty Abatement Request.
If you are meticulous and determined you can win the case. But, you don't want to invite disaster by rashly giving the IRS personal documents which will cause more trouble. It's best to complete the Form 433 in pencil and come see Mr. Hopkins for advice prior to submitting your information to the IRS.
Use a TaxHelp Webinar to prove your uncollectible status:
After you've completed the Forms contact this office for further instructions so we can secure your uncollectible status. Thanks!
J. David Hopkins, JD LLM