Non Collectible Status
Many of our clients are struggling with tax debt, but they simply do not have enough money to pay. If this is the case, it is often possible to negotiate with the IRS to have those clients placed into what is known as “non-collectible status.”
The IRS uses two phrases for describing the status of past due taxes which are deemed not collectible: “Non Collectible Status” or “Currently Not Collectible.” Both of these phrases mean the same thing: that the IRS stops actively attempting to collect the tax debt you owe them. This can be a very powerful tool for families struggling with debt.
What You Need To Know About Non Collectible Status
If our tax attorneys are able to assist you in receiving a Non Collectible Status with the IRS, you might get some breathing room. Keep in mind that this is not like an Offer in Compromise in that the IRS is not going to entirely write off and remove those back taxes. If you are designated as an individual with a Non Collectible Status, the IRS will wait and start collection against you again when your finances improve and you can afford to make payments again. This option provides taxpayers with the time they need to get themselves in a stronger financial position so that they can make arrangements to pay the taxes at the end of the Non Collectible Status agreement period. It is not uncommon to have a taxpayer remain in non-collectible status until the statute of limitations on collections runs out – meaning that you never end up having to pay the taxes at all. However, that outcome is not guaranteed.
How You Get Put In Non-Collectible Status
The IRS does not want to waste its valuable resources in pursuing collection from taxpayers who clearly cannot pay their debts in full. For this reason if you are able to prove – in addition to your having no assets – that you do not have any surplus income after paying your monthly necessary living expenses, the IRS will place your delinquent account in what is known as “non-collectible status.” IRS Financial Statements must be provided along with bank records and other and financial information proving your inability to pay.
Important Collection Concerns
Once the IRS files a “Notice of Intent to Levy,” or has started any other steps to collect money from you, you may be in jeopardy of paycheck wage garnishment, bank account seizures or be in danger of having your assets taken and sold. Immediate steps are necessary to protect your assets from seizure.
Non-collectible status is not the same as a write-off of the debt. The tax debt remains on the books and the IRS will monitor the taxpayer’s subsequently filed tax returns to determine if there is any positive change in the taxpayer’s ability to pay the tax debt. Non-collectible status merely means that the IRS has determined that enforced collection action would be fruitless at this time.
It does not mean that your tax debt has gone away and it does not prevent the IRS from filing a federal tax lien against you.
If you are interested in learning more about non-collectible status, call our office for a consultation with an attorney today.