Currently Not Collectible Status – I.R.S. Debt Collection Alternatives
If you cannot afford to pay the full amount of your tax debt owed to the Internal Revenue Service (“I.R.S.”), there may be collection alternatives available to you. One of these alternatives is having your account with the I.R.S. placed in Currently Not Collectible Status.
Currently Not Collectible Status allows you to acknowledge that while you owe the tax debt, you are unable to currently make any payments. The I.R.S. will look to see if payment of your tax debt will cause a financial hardship. A financial hardship occurs when you are unable to pay your reasonable basic living expenses. To determine whether a financial hardship exists, you may be required to complete a Collection Information Statement (Form 433) to enable the I.R.S. to accurately assess your financial situation. The Collection Information Statement requires you to provide a detailed list of your monthly necessary living expenses as well as any assets you own or income you are currently receiving. The I.R.S will look at all information contained within the Collection Information Statement to determine whether a financial hardship exists. If your account is placed in Currently not Collectible Status as a result of a financial hardship, the I.R.S. is unable to levy against your wages or other assets while your account remains in Currently Not Collectible Status.
In addition to filing a Collection Information Statement, you may also be required to file any late tax returns in order to qualify for Currently Not Collectible Status.
It must be remembered that while your account is in Currently Not Collectible Status, penalties and interest will continue to accrue on the amount owed. Additionally, the I.R.S is entitled to keep any tax refunds you may be eligible for while your account is in Currently Not Collectible Status and apply your refunds towards your debt. Further, while the I.R.S. may not levy your wages or other assets while your account is in Currently Not Collectible Status, a Notice of Federal Tax Lien may still be placed against your property. Unlike a levy which involves a current taking of your assets by the I.R.S. to satisfy your tax debt, a Notice of Federal Tax Lien provides notice to other creditors of the debt owed to the I.R.S.; however, such property is not being seized by the I.R.S. at that time.
Once your account is placed in Currently Not Collectible Status, the I.R.S. will annually reassess your financial situation to determine whether you are now able to make any payments on your tax debt, and thus whether to remove your account from Currently Not Collectible Status.
Co-authored by: Attorney Bradley C. Sagraves & Attorney Kaitlyn A. Sell