The IRS classifies taxpayers into different categories based on various factors. Each of these categories is called a "status" by the IRS. One status, Status 53, applies to people who owe taxes from previous years but who currently have no ability to pay those debts. The IRS considers the taxes owed by people in Status 53 to be "currently not collectible" and this phrase is often used instead. You may see the two terms used interchangeably.
Do you qualify as currently not collectible? Ask the tax relief lawyers at Pearson Butler. Call (800) 265-2314 or contact the firm online to arrange a confidential consultation.
I Owe Back Taxes. How Can Being Designated as Currently Not Collectible Help Me?
Being placed in Status 53 gives a taxpayer significant breathing room on back taxes. As soon as a taxpayer is designated as currently not collectible, the IRS is required to immediately stop all collection activities. This means that any levies or garnishments the IRS may have imposed at that time will be suspended. The IRS will send a Status 53 taxpayer a statement once a year that shows the amount of taxes still outstanding, but this statement is not a bill. So long as the taxpayer remains in the currently not collectible category, this is all the IRS can do. Taxpayers in this category must be aware, though, that the tax debt does not go away simply because of its currently not collectible status. The IRS may still file a tax lien on future assets before it declares any account to be currently not collectible, and interest and late payment penalties might still accrue.
How Do I Go About Qualifying for Currently Not Collectible Status?
Because the IRS must suspend all collection activities immediately upon granting currently not collectible status, the taxpayer seeking this status must give the IRS incontrovertible proof that he or she has no ability to pay the taxes owed at present. This evidence is submitted on IRS Form 433-F, also called a Collection Information Statement (CIS). The CIS details all of the submitting taxpayer's assets and sources of income, along with the expenses the taxpayer must pay regularly to stay afloat. After reviewing the submitted information, the IRS will consider the taxpayer's request on a case-by-case basis.
If the amount of back taxes an individual owes is large enough, the taxpayer might be required to use Form 433-A instead of Form 433-F to apply for currently not collectible status. In addition, if the taxpayer is self-employed, the IRS will also require Form 433-B, which is essentially a CIS for the taxpayer's business.
How Long Can I Stay in Currently Not Collectible Status?
Status 53 is designed to be a temporary measure to allow a taxpayer time to get his or her affairs in order and make a financial recovery. The tax debt is not eliminated – the IRS merely must suspend its efforts to collect the back taxes, and penalties and interest may still accrue.
Initially, the IRS will consider a taxpayer's debt to be currently not collectible for a period of one year. Each new tax return from a person in Status 53 will be examined to determine whether the taxpayer is now able to begin making payments on the debt. If the IRS thinks the taxpayer's financial situation has improved, it may ask for more information similar to that on Form 433-F. If the IRS does not think the taxpayer's situation has improved enough to allow payments on the debt, the currently not collectible status will roll over for another tax period.
Will My Tax Debt Just Hang Around Forever?
If the IRS is unable to collect income taxes within 10 years of the date on which they were first due, it is no longer allowed to sue the taxpayer to collect them. In other words, there is a 10-year "statute of limitations" on income taxes. During the time a taxpayer is in currently not collectible status, the statute of limitations continues to run, meaning that if the IRS is unable to collect the back taxes within this 10-year period, the debts expire automatically. The taxpayer will want to speak with an attorney to review their tax history and determine what taxes are owed and what the collection statute of limitations is.
What if I Don't Qualify for Currently Not Collectible Status?
All may not be lost even if a taxpayer does not qualify for the Status 53 designation. The IRS might exercise what it calls "reasonable forbearance" and not take certain collection actions if doing so would prevent a taxpayer from being able to afford essential living expenses after the taxes are paid. If the IRS exercises forbearance, it might, for example, decide not to seize a taxpayer's automobile, since the taxpayer might then be unable to get to work to earn enough money to pay rent. Each situation is treated individually according to the circumstances surrounding the taxpayer's financial condition. Factors such as a person's age or health might also be considered in this determination.
Why Can't I Do All this on My Own? Why Should I Hire a Tax Attorney?
Qualified tax attorneys know all the ins and outs of obtaining currently not collectible status for a taxpayer. Even if a taxpayer can figure out the process without assistance, non-lawyers might assume that things are finalized when they are not, leaving the IRS free to continue its efforts to collect. For example, a taxpayer does not truly enjoy currently not collectible status until the IRS enters the proper codes into the taxpayer's "tax transcript." The average non-lawyer will not know this and might assume that the matter is settled, when in fact the IRS can still take collection actions such as levies or garnishments until that action takes place.
A qualified tax lawyer will prevent any such misunderstandings, and, frankly, knows the system a lot better than you do. Good tax lawyers also know other ways of staving off the IRS, in case a taxpayer is unable to obtain Status 53.
Why Should I Hire Pearson Butler?
Hiring Pearson Butler will ensure that you have excellent representation and the personal attention of a lawyer with years of experience in dealing with the IRS. There are unscrupulous tax "experts" out there who will quote a price that seems very attractive for the work that needs to be done, and then either hand the work off to a paralegal or prepare only the basic documents and not follow up the necessary supporting documentation. Or they might not actually negotiate on your behalf with the IRS.
The attorneys at Pearson Butler will take all necessary action on your behalf, including IRS negotiations if you wish, and your work will never be assigned to low-level support staff. You will always have the personal attention of a qualified and experienced attorney. The firm’s staff will not give you false expectations as to any results. If it turns out that you cannot qualify for not currently collectible status, your attorney will work with you to achieve some measure of relief from the IRS, if possible.
Call Pearson Butler today at (800) 265-2314 to schedule your free case consultation. From offices in Bountiful, American Fork, and South Jordan, the firm serves clients across Utah.