IRS Debt Currently Non-Collectible (Status 53)
Can the IRS Do Anything To Me if I Have No Money?
Sometimes taxpayers’ financial situations worsen to the point that they cannot pay their back taxes, and cannot even afford to make monthly payments.
In cases like this, the IRS can mark a taxpayer’s account as “Currently Non-Collectible” (CNC) and any collection activities, like tax levies, are stopped. This is known as Status 53.
If the IRS places you into currently not collectible status, it means that they are not going to require any payments from you and they are going to leave you alone until your financial situation improves.
If you are approved for currently not collectible status, the IRS will release any levies and garnishments that have been issued against you.
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How Long Do I Remain In Currently Not Collectible Status?
Once you are placed into this status, the IRS will monitor your tax return filings each year to watch for an increase in income. If they notice that your income has increased, they will remove you from this status and ask you complete a new financial statement to determine whether or not you can then afford to make monthly payments.
By law, you are guaranteed to remain in this status for at least one year. In practice, if you do not have significant changes in your income then you can remain in this status until the statute of limitations expires and the debt is forgiven.
How Do I Prove That I Qualify?
The IRS will require you to submit a financial statement that details your monthly income and expenses, as well as what assets you have. When analyzing your income and expenses, you will need to prove to them that after paying all of your necessary living expenses there is no money left over that could be used to make a monthly payment.
Additionally, you will have to prove to them that there are no assets that could be liquidated or sold to make a lump-sum payment to the IRS. For example, if you have equity in your home you will probably need to prove to the IRS that you cannot refinance your home. You typically do this by applying for a loan and obtaining a rejection letter.
What's Next After Currently Not Collectible?
Being in Status 53 (Currently Not Collectible) does not mean the debt goes away. It means that the IRS has determined you cannot afford to pay the debt at this time and adequate information has been provided to warrant your placement into Status 53 (Currently Not Collectible).
Penalties and interest will continue to be added to the debt while you’re in not collectible status, so this is generally just a temporary situation.
If you qualify for Currently Non-Collectible status right now, it is oftentimes best to immediately do an Offer in Compromise so that you can have a permanent solution to your tax debt. You will usually qualify for an Offer in Compromise if you qualify for Currently Not Collectible status, though this is not always true.
If the statute of limitations is close to expiring on the debt, it is usually best to do nothing and hope that the IRS keeps you in this status until the expiration date.
How Can Colonial Help?
Colonial Tax Consultants’ Tax Attorneys, Enrolled Agents and CPAs are experienced and can quickly determine the likelihood of placing you in Status 53 (Currently Not Collectible) through our free consultation.
We are extremely familiar with the requests the IRS will make and know how to move the proper paperwork through the IRS system to get you the protection that Status 53 (Currently Not Collectible) provides very quickly.
To speak with someone about your specific situation to see if you qualify to be placed into currently not collectible status, and to receive immediate protection for any aggressive collection attempts by the IRS, please feel comfortable contacting us so we can help!
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