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Currently Not Collectible

One of the ways to get out of your tax debt is to be declared “currently not collectible.” The IRS can declare you as being currently not collectible, a financial hardship status, after it reviews evidence that you have no ability to pay the tax you owe.   This is done through a 433-F form, and proof of your financials.  This is often a good technique to resolve tax debt if there is little to no disposable income, but there is equity in assets.

As soon as the IRS determines that you cannot pay any of your tax debt due to an economic hardship and declares you currently not collectible, the IRS must immediately stop all collection activities including levies and garnishments.  While you are in the non-collectible status, the 10-year statute of limitation on tax debt collection continues to run.

The IRS has 10 years from the date of assessment to collect all taxes, penalties, and interest.  After this statute of limitations has expired, the taxpayer no longer owes anything to the IRS.  Therefore, in a currently not collectible status, you will not have to make payments to the IRS and no collection activity will be brought. And after ten years from the date of assessment, the taxes, penalties, and interest will go away.

However, the ten year statute of limitations can be extended, due to various reasons, such as doing the following during the ten year period:

  • A taxpayer waives the ten year statute of limitations in writing
  • If the taxpayer files an offer in compromise
  • If the taxpayer files bankruptcy
  • If the taxpayer files an application for taxpayer assistance order (Form 911-ATAO)
  • If the taxpayer timely files a Request for a collection due process hearing (Form 12153-CDP)

Each of these actions will extend the statute of limitations, or in some cases, may reset the full ten years.  If a taxpayer has ten years left before a tax will be erased due to the statute of limitations, than a currently not collectible status on a debt is more like a temporary measure to stop collection action due to a temporary hardship. This does not eliminate the back tax debt, only stops collections. Often, if a person qualifies for a currently not collectible, they may also be a good candidate for an offer in compromise.

If you owe the IRS or the state, and cannot afford the payments to them whatsoever, than you should contact us at Platinum Tax Defenders to protect you and your family from collection actions and determine whether a currently not collectible is just the first or last step in your tax relief process.