How to Negotiate Tax Debt As Uncollectible With the IRS
The Pros and Cons of Uncollectible Status If you are facing severe financial hardship and cannot repay your tax debt, there is a solution.
The IRS can classify your case as Currently Non-Collectible, suspending all collection action.
This means that for a period of 1-2 years, you will not be required to make any payments towards your tax debt and the IRS will not take any enforcement action to collect the delinquent liabilities.
Also known as Uncollectible Status, this can be an effective short-term strategy for Taxpayers who are struggling financially and need some time to get back on solid ground.
It is most common for Uncollectible Status to be an available resolution for individuals, however, it is also possible for businesses to have their cases placed on hold with the IRS.
In order to qualify for Uncollectible Status, Taxpayers will need to complete an updated financial statement, Form 433-A and/or Form 433-B, and provide all required supporting documentation to verify the hardship.
Additionally, you will need to remain 100% compliant with all federal tax obligations, in order to keep your case uncollectible.
Any new tax accrual or unfiled return can trigger a quick transfer of your case back to IRS Collections.
The obvious benefit with Uncollectible Status is that it will buy you time with the IRS.
Time is a very precious commodity, not to be undervalued when you owe a tax debt.
Uncollectible Status will allow you to focus on other bills, as well as, necessary living and business expenses.
You are free to save money, pay down other debts, and pursue any available business opportunities.
There is another, lesser known benefit to Uncollectible Status.
What the IRS won't tell you is that there is a 10-year window to collect the taxes.
Under the collection statute, the IRS has 10 years from the date of assessment to collect the taxes, for every period owed.
After 10 years, the IRS forfeits their right to pursue you for the tax debt.
Any remaining balance will be permanently uncollectible and the federal tax lien will be released.
While your case is Currently Non-Collectible, the 10-year clock continues ticking for the IRS.
Uncollectible Status can be a tremendous strategy to save you money, if you owe taxes for older years and are getting close to the expiration date for the collection statute.
It is possible for the debt to go permanently uncollectible while your case is on hold with the IRS.
Therefore, it is important to know the collection statute expiration date for every period owed, as you are planning your tax resolution strategy.
Uncollectible Status has several drawbacks for Taxpayers.
First, penalties and interest will continue to accrue on the tax debt.
The IRS charges significant penalties and interest, which will increase your debt exponentially, in time possibly even doubling the original tax balance! While Uncollectible Status may buy you time with the IRS, it will not make your tax debt disappear.
For example, if your case is on hold for 2 years and no payments are made, the IRS will revive your case in Collections and the debt will be significantly higher than when you started.
I recommend that you use the time to develop a long term strategy to deal with your tax debt, such as pursuing an Installment Agreement or Offer in Compromise.
Uncollectible Status can be a great advantage for a Taxpayer, as it will give you time to get all your finances and paperwork in order, to make you a stronger candidate for a resolution with the IRS.
Uncertainty is another drawback to Uncollectible Status.
Once your case is listed as Currently Non-Collectible, the IRS will typically not provide any notice before your case is transferred back to the Collections Division.
The IRS does not set a specific date for your case to become active again.
This means that you are responsible for monitoring your case with the IRS, to check on the status.
Once your case is transferred back to Collections, anything can happen, even bank levies or wage garnishments without warning.
And remember, any new tax accruals will cause your case to be sent to IRS Collections almost immediately.
Once your case is sent back to IRS Collections, you will need to provide updated financial information and pursue a resolution to the tax debt.
It is possible to have your case reclassified as Currently Non-Collectible, however, you will need to document your continued financial hardship.
In sum, there are pros and cons to Uncollectible Status with the IRS that need to be considered when negotiating with the IRS.
Better Way Tax Consulting, LLC will guide you to the best resolution available for your particular situation.
Successful resolution of your tax debt is achievable.
Contact Better Way Tax Consulting today for a free consultation and take control of your life again.
The IRS can classify your case as Currently Non-Collectible, suspending all collection action.
This means that for a period of 1-2 years, you will not be required to make any payments towards your tax debt and the IRS will not take any enforcement action to collect the delinquent liabilities.
Also known as Uncollectible Status, this can be an effective short-term strategy for Taxpayers who are struggling financially and need some time to get back on solid ground.
It is most common for Uncollectible Status to be an available resolution for individuals, however, it is also possible for businesses to have their cases placed on hold with the IRS.
In order to qualify for Uncollectible Status, Taxpayers will need to complete an updated financial statement, Form 433-A and/or Form 433-B, and provide all required supporting documentation to verify the hardship.
Additionally, you will need to remain 100% compliant with all federal tax obligations, in order to keep your case uncollectible.
Any new tax accrual or unfiled return can trigger a quick transfer of your case back to IRS Collections.
The obvious benefit with Uncollectible Status is that it will buy you time with the IRS.
Time is a very precious commodity, not to be undervalued when you owe a tax debt.
Uncollectible Status will allow you to focus on other bills, as well as, necessary living and business expenses.
You are free to save money, pay down other debts, and pursue any available business opportunities.
There is another, lesser known benefit to Uncollectible Status.
What the IRS won't tell you is that there is a 10-year window to collect the taxes.
Under the collection statute, the IRS has 10 years from the date of assessment to collect the taxes, for every period owed.
After 10 years, the IRS forfeits their right to pursue you for the tax debt.
Any remaining balance will be permanently uncollectible and the federal tax lien will be released.
While your case is Currently Non-Collectible, the 10-year clock continues ticking for the IRS.
Uncollectible Status can be a tremendous strategy to save you money, if you owe taxes for older years and are getting close to the expiration date for the collection statute.
It is possible for the debt to go permanently uncollectible while your case is on hold with the IRS.
Therefore, it is important to know the collection statute expiration date for every period owed, as you are planning your tax resolution strategy.
Uncollectible Status has several drawbacks for Taxpayers.
First, penalties and interest will continue to accrue on the tax debt.
The IRS charges significant penalties and interest, which will increase your debt exponentially, in time possibly even doubling the original tax balance! While Uncollectible Status may buy you time with the IRS, it will not make your tax debt disappear.
For example, if your case is on hold for 2 years and no payments are made, the IRS will revive your case in Collections and the debt will be significantly higher than when you started.
I recommend that you use the time to develop a long term strategy to deal with your tax debt, such as pursuing an Installment Agreement or Offer in Compromise.
Uncollectible Status can be a great advantage for a Taxpayer, as it will give you time to get all your finances and paperwork in order, to make you a stronger candidate for a resolution with the IRS.
Uncertainty is another drawback to Uncollectible Status.
Once your case is listed as Currently Non-Collectible, the IRS will typically not provide any notice before your case is transferred back to the Collections Division.
The IRS does not set a specific date for your case to become active again.
This means that you are responsible for monitoring your case with the IRS, to check on the status.
Once your case is transferred back to Collections, anything can happen, even bank levies or wage garnishments without warning.
And remember, any new tax accruals will cause your case to be sent to IRS Collections almost immediately.
Once your case is sent back to IRS Collections, you will need to provide updated financial information and pursue a resolution to the tax debt.
It is possible to have your case reclassified as Currently Non-Collectible, however, you will need to document your continued financial hardship.
In sum, there are pros and cons to Uncollectible Status with the IRS that need to be considered when negotiating with the IRS.
Better Way Tax Consulting, LLC will guide you to the best resolution available for your particular situation.
Successful resolution of your tax debt is achievable.
Contact Better Way Tax Consulting today for a free consultation and take control of your life again.
