Currently Not Collectible
If You Owe Back Taxes and Can’t Pay, the IRS May Declare You “Currently Not Collectible”
If you do not have the means to pay taxes owed, have little assets that the IRS can levy, no income above the minimum need to cover necessary living expenses, you would most likely be able to be considered “currently not uncollectible (CNC)” to the IRS. Being considered “uncollectible” to the IRS means that they can temporarily pause collections against you under the IRS hardship rule.
If you qualify for this, you still owe the IRS money and interest will continue to accrue. Moreover, a Federal tax lien will be placed for all tax years showing an outstanding balance. However, all collection activities must be temporarily suspended against you. The IRS will then continue to monitor your financial situation to see if it improves to a point where they can demand payment. This review happens normally once a year. You will be required to send an updated financial statement every year for them the IRS to review. These statements must be accurate because they will compare it to filed tax returns to make sure everything matches. One important thing to understand is that someone who receives this status can lose it if the taxpayer create new unpaid tax liabilities in the future or misses a tax filing.
One important thing to note about being considered uncollectible is that the IRS statute of limitations is still running for those back taxes owed. The statute of limitations lasts 10 years on IRS taxes due, if they are not collected in this period, they can no longer collect on these amounts (with some exceptions). Many people have been declared uncollectible for a period of years and have ended up owing no tax once that statute of limitations for those years owed expire. Generally, if a taxpayer has unfiled tax returns, a CNC is not an option. In certain cases, if a tax levy is present, the taxpayer may get a CNC approved.
How to Receive An “Uncollectible” Status From the IRS
In order to receive and uncollectible status from the IRS you must be able to prove that you do not have any assets that would allow you to pay the tax amounts owed. Therefore,you must show you only have enough money to pay for your basic living necessities. To do this, you must fill out IRS Form 433-F or 433-A, which is a collection information statement. This is the form used to show all your assets, and is required with most IRS filings because it will give them a sense of your assets that they can liquidate to satisfy your tax liability. However, the purpose of doing this when filling it out to receive an uncollectible status is to show that you do not have any assets of value that they can liquidate and it would not be worth their time and effort to collect from you.
IRS Tax Resolution Help and Info
Guide to Proving Financial Hardship
In order to be declared “Currently not Collectible”, you will need to prove that collecting the taxes owed will cause you financial hardship. Here is a guide on proving financial hardship to the IRS.
Statue of Limitations on Taxes Owed to IRS
If you get declared “currently not collectible”, you better understand the statute of limitations on IRS taxes because there is a chance that they may expire while your account is considered uncollectible and therefore the taxes will no longer be owed.
Options When You Cannot Pay Taxes on Time
Many people don’t qualify for getting declared uncollectible. Here are some more methods that can be used if you can’t pay your tax bill when it is due.
IRS Tax Collection Process
Getting declared currently not collectible will temporarily stop the IRS collection process. Understand how the collection process works and other methods that can be used to stop it.
Delay IRS Collections
If you just need more time to pay and want to delay the IRS collection system you can easily get extensions.