If there is absolutely no way for you to pay your tax debt, and no way for the IRS to collect the money owed via the more traditional forms of tax resolution, you can file under the “currently not collectible” status.

What is the “currently not collectible” status?

“Currently not collectible” means exactly what it sounds like – the IRS will not be able to collect any owed taxes or penalty charges if:

  • Your wages cover no more than your necessary living expenses so that there is no amount the IRS can garnish
  • You have no assets worth levying. Remember that the IRS cannot seize an asset if you have less than 20 percent equity in the item or if the expenses involved in seizing and selling it are more than the equity is worth. This makes the IRS seeking another form of tax resolution unlikely.

The fact that you have nothing worth the IRS taking is not exactly an enviable position to be in, but it can help in dealing with them. If your account is deemed to be uncollectible, the IRS will stop the collection process until your financial situation improves and another form of tax resolution becomes more realistic. Interest and penalties will continue to build up against you, and you will have to provide financial statements each year to show whether or not you are still “currently” unable to pay.

If the financial statements show that your situation has improved enough, the IRS collection process will resume. But if the 10-year statute of limitations for back taxes expires while you have “currently not collectible” status, the tax debt itself will become permanently not collectible and no other form of tax resolution will be needed.

How do you qualify for the “currently not collectible status?”

To qualify for the currently not collectible status you will need to meet one or more of the following requirements:

  1. You’re unemployed and have no other form of income.
  2. Your only source of income is from Social Security benefits, unemployment benefits, or welfare. 
  3. Your gross annual income falls under $84,000.
  4. After paying for your basic living expenses, you have next to no money left to spare.
  5. There are only a few years left on the 10-year statute of limitations the IRS has to collect your tax debt.

How do I request the “currently not collectible” status?

In order to receive a currently not collectible status, it is best to consult with a tax attorney with experience in resolving IRS back-tax liability. Your tax attorney will be able to determine whether your financial situation is worth pursuing a “currently not collectible” status.

If you don’t wish to consult with a tax attorney, you can also contact the IRS directly. You will need to fill out the IRS Form 433-F, Collection Information Statement and request an updated tax balance due which includes any accrued interest and penalties.

Optima Tax Relief is here to help with any questions you may have. We offer a range of tax relief services. Consult with one of our experts today.

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