If you owe back taxes and are unable to make any payments, you may need a special tax status called “currently not collectible.” This means that your debt is still valid, even though there’s no way to pay it back at the moment. The IRS can’t take any of your property or garnish your wages when you’re granted currently not collectible status. Don’t forget about these debts, though, because the IRS is still pursuing collection on these past-due taxes.
What is Currently Not Collectible Status?
If you can’t pay your back taxes and reasonable living costs, the IRS will put your account in “currently not collectible” status. You can make this request by completing the appropriate form together with proof that demonstrates how much of your remaining income is available to make a payment, as well as any assets that you sold in the recent past to satisfy increasing debts, such as a home.
You must prepare a case to present to the IRS to qualify for the currently not collectible status. Collect records of your bills, income documentation (pay stubs, bank statements, alimony, etc.), and investments. Establishing your incapacity to pay is critical, so the IRS can award you status if it deems you cannot afford your necessary expenses.
Having a specialist on your side is essential when interacting with the IRS. If you can’t answer the IRS’s probing questions, you could find yourself in even more difficulty than you were already in. Keep in mind that they are not your friends. Their job is to get what they think you owe them. So make sure your interactions with them are as simple and effective as possible. Therefore, contacting one of our tax resolution experts is so important.
Eligibility Requirements for Currently Not Collectible Status
To qualify for currently not collectible status, paying your taxes must cause you significant hardship. This means that paying anything toward your tax debt at this time would result in “serious hardship.” In addition to wages, the IRS examines interest, dividends, net profits, distributions, and other income when determining whether your income matches this condition.
If your status is approved, that doesn’t absolve you of the obligation to submit current and future tax returns. The currently not collectible status only applies to back taxes that the IRS is attempting to collect from you. It is just a temporary fix to help you get back on your feet. This will put you in a better position to make a payment in the future. The IRS may reevaluate your situation every year or two if there appears to be a chance of repayment. You can keep the status active if you can still not pay your back taxes based on your financial situation.
Statute of Limitations
The IRS takes pride in being a collection-oriented institution. They will try to get you to pay back taxes for only 10 years after they were imposed against you. The IRS can no longer recover back taxes after the ten-year statute of limitations period has expired. This also applies if you have the status “currently not collectible.” If you do not have the status, are in an installment arrangement, or have a pending offer in compromise, the IRS can garnish your wage and add further penalties to your case, making your financial situation even more difficult.
Contact An Experienced Tax Resolution Specialist
As a result of the challenging state of the economy, many families are fighting an uphill battle to make ends meet. Reaching out may provide relief if you’re concerned about the IRS garnishing your paychecks, seizing your bank accounts, or filing liens against your property due to unpaid taxes.
Our firm will help explain all the options available so that you don’t have to worry about anything. We know how daunting this can be if you’ve never done anything like this before. Every problem with the IRS has a solution. Get in touch with one of our tax resolution experts to discuss your circumstances and see if you qualify for currently not collectible status or another IRS settlement option.