Should You Pursue IRS Currently Not Collectible Status?
Get help with IRS uncollectible status.
IRS Currently Not Collectible Status
To be declared IRS Currently Not Collectible (or Status 53), you must prove that you cannot pay your back taxes without experiencing unfair economic hardship. That’s why uncollectible status is sometimes referred to as “hardship status”.
When considering your economic hardship case, the IRS looks at whether you can afford the modest expenses allowed for food, housing, utilities, transportation, medical treatment and other essentials based on your household income. The IRS decision is made on a case by case basis.
Our experienced IRS tax experts can determine if you qualify for Currently Not Collectible status and if it is right for you.
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What does it mean for your IRS account to be placed in uncollectible status?
- The IRS may keep any tax refunds owed you and apply them to your debt
- The IRS will stop all collection actions against you; they should not levy your assets or income;
- Interest and penalties continue to accrue on the federal tax debt;
- The IRS may file a Notice of Federal Tax Lien even while you are uncollectible, and this can affect your credit rating as well as your ability to sell assets;
- The IRS may also review your financial situation periodically to determine if you still qualify.
Status 53 isn’t a permanent solution to a tax problem, but it can buy you time—and because of the IRS Statute of Limitations on collections, time alone can be used strategically.
Why the IRS Statute of Limitations and Your Liability Expiry Date Matter
One of the first things we consider when seeking IRS uncollectible status for a client is the expiry date of their tax debt.
By law, the IRS has 10 years to collect back taxes from the date you filed your tax return (or the date they filed on your behalf). That’s why proving economic hardship can be an effective strategy if you have an IRS balance that is close to the 10-year expiry. For clients who qualify, Currently Not Collectible status can be put in place to avoid disruptive IRS collection actions until the statute of limitations takes effect.
You may be a good candidate for Status 53 if you have no equity in assets and less than $25 in disposable income per month after IRS allowable monthly expenses. If your income is less than the allowable expenses, you will usually qualify for hardship status.
However, only a small percentage of those who owe back taxes do qualify for uncollectible status. At Precision Tax Relief we will give you our best advice as to whether you are a good candidate.
How can you file for hardship with the IRS?
When you work with Precision Tax Relief, your Case Manager will use your financial information to demonstrate that you are unable to make any kind of payment to the IRS.
We will need documentation supporting your expenses, income, assets and liabilities. If the IRS requires that you complete a Collection Information Statement, we will walk you through submission of that information.
One of the best ways to secure uncollectible status is by submitting unfiled tax returns and the current year tax return, even if you can’t pay. It is important to demonstrate to the IRS full compliance and avoid any new late filing penalties. At Precision, we have extensive experience bringing our clients up to date with their unfiled taxes and filing in-year tax returns.
The priority of the IRS is to see that you remain out of tax debt in the future. They are looking for certainty that you have resolved the underlying issues causing your tax debt. We may need to adjust the amount of taxes withheld by your employer on each paycheck. If you are self-employed, the IRS will usually require that you make quarterly estimated tax payments for the current year. We can help with that, as well.
At Precision Tax Relief, we know what the IRS looks for and how best to satisfy their requirements for uncollectible status. As licensed professionals, we can help you complete the Collection Information Statement, maximizing and capturing all allowable expenses and negotiating for exceptions.
Not sure whether Currently Not Collectible status is in your best interest? We can accurately assess your case in a free initial consultation. If uncollectible status isn’t ideal for you, we may steer you towards a settlement or payment agreement with the IRS. You can count on our best advice.
That’s why Precision Tax Relief has a 98% satisfaction rating in more than 700 reviews—more than any other tax relief agency.
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FAQs on 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.
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.
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.
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.
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.
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.
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.
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