What are the benefits of IRS Currently Not Collectible status?
When you are declared IRS uncollectible, or Status 53, you gain a temporary reprieve from IRS collection actions. IRS Currently Not Collectible status wins you time to either negotiate a more favourable resolution or wait out the 10-year Statute of Limitations on your debt.
What are the drawbacks of IRS uncollectible status?
Unfortunately, Status 53 does not put your debt on hold. Interest and penalties continue to accrue.
The IRS can also file a lien on any assets you may have, despite your Currently Not Collectible status.
The temporary nature of uncollectible status is another drawback; the IRS has the right to reassess your case periodically. Ongoing interactions with the IRS and uncertainty can be stressful.
Finally, to maintain IRS uncollectible status you must demonstrate compliance with strict living expense limits. If you can increase your income and standard of living, most people would rather do so, even if it means paying their back taxes.
What is the difference between IRS Currently Not Collectible status, a settlement and an installment agreement?
IRS uncollectible status is a temporary reprieve based on economic hardship. While you have Status 53, the IRS will not actively attempt to collect your debt. However, uncollectible status does not reduce the amount of your federal tax debt. You may still face future collection action because the IRS can periodically reassess your case.
A settlement, known as an Offer in Compromise, is an agreement negotiated with the IRS to pay less than your total back tax debt. Once a settlement agreement is in place, you will not face IRS collections provided you honor the terms of the Offer in Compromise. If you can afford to pay the IRS some of your tax debt, a settlement can be an excellent solution.
An installment agreement is a negotiated arrangement with the IRS allowing you to pay your tax debt in affordable installments. If you have some income left over after expenses but are not eligible for a settlement, an installment agreement may be viable. Like the settlement agreement, an installment agreement can secure you lasting reprieve from IRS collections.
Is uncollectible status the right choice for me?
If you don’t qualify for an Offer in Compromise and can’t afford an installment agreement, you may qualify for IRS Currently Not Collectible status. The IRS requires that you demonstrate an inability to pay any taxes, given your income and allowable expenses.
Uncollectible status may be right for you if you have no access to equity in assets and if your income is low.
The expiry on your tax debt is another consideration. If your tax debt is several years old, you may be approaching the 10-year Statute of Limitations on IRS collections. In such cases, uncollectible status can be the bridge you need from your current hardship situation to permanent freedom from IRS collections.
What qualifies as economic hardship?
To prove economic hardship, you must show that after expenses you do not have the disposable income to pay back taxes. The IRS sets out allowable monthly expenses in their Collection Financial Standards. Assuming you have no access to equity from assets, your income must match or be less than the monthly expenses allowed by the IRS.
How can I apply for IRS Currently Not Collectible status?
To consider your case, the IRS will look at supporting documentation for your income, expenses, debts and assets. You should gather these in advance and cross-reference your actual expenses against the IRS Collection Financial Standards. If your income does not cover the basic IRS-allowable living expenses, a hardship case could be made.
To apply independently, contact the IRS via the information included in any notice you have received. If you have not received contact information in a notice from the IRS, call the main IRS number for individual or business taxpayers.
The IRS may require that you complete any of the following:
- IRS Form 433-A, Collection Information for Wage Earners and Self-Employed Individuals
- IRS Form 433-F, Collection Information Statement
- IRS Form 433-B, Collection Information Statement for Businesses
For help in your application for IRS uncollectible status, contact us at Precision Tax Relief.
What is the advantage of getting professional help with my IRS Currently Not Collectible status application?
Most people find negotiating with the IRS frustrating and unproductive. As a taxpayer, you have rights, but the IRS will not help you take advantage of these rights.
Our job as Enrolled Agents (federally authorized tax practitioners) is to make sure you are protected to the full extent of your rights.
We can help you avoid the common pitfalls and negotiate the most favourable exceptions to the allowable expenses.
If IRS uncollectible status isn’t in your best interest, we’ll tell you honestly and clearly explain the alternatives. By knowing your prospects from the beginning, you can save time and money.
What if the IRS denies my application for uncollectible status?
If you have applied without success, we can help. Our experts can assess whether your application was denied because of how it was presented, or because you do not meet the IRS criteria for uncollectible status.
If we think you are a good candidate but that your initial application was flawed, we can appeal the decision on your behalf.
If it does not make financial sense for us to represent you, you can request a conference with the IRS Collection Manager. You may also qualify for free or low-cost assistance from a Low Income Taxpayer Clinic.
How long can I be considered uncollectible?
In theory, you could remain protected from collections by hardship status for up to a decade. The IRS Statute of Limitations puts an expiry date of 10 years on their collections activity, from the date the taxes were filed. However, the IRS can review your expenses and income periodically while you have Currently Not Collectible status. Very few people qualify for hardship over successive years, which is why uncollectible status makes more sense if your tax debt is approaching the 10-year expiry date.
