Individuals that are not able to pay the Internal Revenue Service federal taxes annually have a tax liability. Currently Not Collectable is an available option to protect assets from the IRS collections department. If you qualify, you can postpone levies and garnishments appointed by the IRS. Bank accounts will not be frozen and the collections from the IRS will cease to be an immediate threat.
If you lack adequate income to make payments on your taxes, then you may likely qualify for Currently Not Collectable. This is a useful tool in order to make adjustments to your finances. The intention is not a permanent tax debt resolution. The statute of limitations on unpaid taxes is ten years. If you aren’t able to pay the debt within the time frame of ten years, the debt will expire and the IRS will not try to collect it.
Who Is Eligible For Currently Not Collectible Status
If you are a person who pays taxes, you are a candidate for Currently Not Collectible status. If you have a debt with the IRS you may qualify.
What will determine eligibility is:
- Your monthly gross income
- Your living expenses
- Liquid assets
In other words, until you are able to make monthly payments, you are eligible for Currently Not Collectible. If your living expenses are greater than your income, and as a consequence, paying the IRS would put you in a hardship situation, you will be approved for Currently Not Collectible status and the IRS will essentially leave you alone until your financial situation improves. The IRS will send you a letter stating that it has closed your case temporarily and that you do not have the money to pay the debt at this time.
After you are approved for the Currently Not Collectible status you will receive a yearly statement from the IRS, as a friendly reminder that you still owe taxes. Late payment penalties and interest will be included on the statement.
If the IRS decides that you can make payments and you disagree you can request a conference with the IRS collection manager, hire a tax attorney or your can appeal certain collection actions or proposals.
Allowable Living Expenses
Organizing your financial information is essential. All delinquent tax returns must have been filed. You will also need the last three months of check stubs from your job as well as the last three statements from your bank. All copies of statements of any other income you have received such as child support, social security or welfare is required. If you are seeking Currently Not Collectible status your financial records are required so the IRS can determine if you can afford to make payments on your tax debt. The IRS will need to review copies of your utility bills, mortgage payments, and credit card statements.
The IRS will take in consideration transportation costs, food, and clothing and other expenses related to running a household. Healthcare and medical expenses that are paid out of pocket are also included.
The IRS will ask you to fill out several forms to establish your financial situation. Calculating disposable income is the goal to establish if you are able to make monthly payments or pay off the debt without exemption.
In order for the IRS to determine your ability to pay, they will require proof of your assets. Your car, real estate, or any other investments you may have. Fair market value of your assets is for you to estimate. The IRS may ask you to sell some of your assets to pay your tax liability. If you are living with your spouse, you will need to submit all the information for them as well.
If you have equity, you may be required to get a loan against your property to pay the tax debt. Frequently, the IRS will require you to attempt securing a loan from two banks or lending institutions. Hiring an experienced and qualified tax attorney may be in your best interest to assist you with dealing with outstanding debts to the federal government.
The IRS will be monitoring your income from various sources such as your employer or if the value of your home increases, you may become ineligible for Currently Not Collectable on your taxes. Although, if you are on a fixed income such as disability, social security, unemployment wages or if you are unemployed, the review of income will not apply to you.
Do not ignore any notices you receive from the IRS. Hiring a qualified tax liability attorney will make the process less stressful for you and your spouse. Consider an attorney that has years of experience dealing with the IRS for guidance during the process of establishing Currently Not Collectible status.