Currently Not Collectible Status
The IRS has the authority to put an account with an outstanding tax balance on currently not collectible status. This authority is set out in policy statement 5-71.
Currently not collectible status can be an excellent resolution for those who are not able to pay their tax liabilities currently.
About Currently Not Collectible Status
During the period that the taxpayer is determined currently not collectible, the statute of limitations for the IRS to collect continues to run and penalties and interest continue to accrue.
The IRS will often file a notice of federal tax lien if the aggregate unpaid balance equals or exceeds $10,000.
An account that is determined to be currently not collectible should be monitored and the IRS should follow up with the taxpayer every few years. In most cases, this involves sending a form letter to the taxpayer each year reminding the taxpayer of the growing tax balance. In other cases, the taxpayer doesn’t receive any contact or the case is eventually assigned to a revenue officer to work.
Qualifying for Currently Not Collectible Status
Generally, an account can be put on currently not collectible status if the IRS determines that the taxpayer has no assets or income which are, by law, subject to levy. The IRS can also put an account on currently not collectible status if the taxpayer can establish that a levy would create a hardship. Generally, a hardship exists if a levy would prevent the taxpayer from being able to pay their necessary living expenses. This is something more than payment being a mere inconvenience.
There are other cases where the currently not collectible can be used. For example, it may be used if the IRS is not able to locate the taxpayer or assets, if the statute of limitation for collection has lapsed or is about to do so, the person dies and there is no collection potential for the estate, the taxpayer is a business that cannot pay its back taxes but it can remain current going forward, and the IRS isn’t able to contact the taxpayer although the address is known and there is no means to enforce collection, as in the case of a taxpayer who is in prison, hospital, or foreign country.
Requesting Currently Not Collectible Status
The IRS will sometimes place accounts on non-collectible status on its own. But in most cases, the taxpayer has to request currently not collectible status and submit financial statements to the IRS.
We Can Help With Your Tax Debt
An experienced tax attorney can help ensure that the IRS and states follow these rules and that the rules are used to your benefit rather than your detriment.
If your case is in collections you need to speak to an experienced tax attorney.
Please call us at (713) 909-4906 or schedule an appointment to discuss your tax debt.
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