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Can You Declare “Currently Not Collectible”?

December 10, 2010 By


Yes, the Internal Revenue Service does have a conscience. If a taxpayer has met severe hardship and cannot pay his or her debt to the IRS, he or she can request Status 53. When a taxpayer’s debt is placed in Status 53, it receives the status of Currently Not Collectible, which means exactly what it sounds like. While the taxpayer is designated Currently Not Collectible, the IRS will not require collection of that person’s debt.

To achieve this status, the taxpayer must provide supporting documentation that proves they have met legitimate financial hardship. It is important to be aware that the IRS turns a discriminating eye on every attempt to attain Status 53, and requires documentation of every financial detail before placing a taxpayer in Currently Not Collectible status. Any fraudulent or frivolous attempts to be placed in Status 53 carry severe, even criminal, consequences. This means it is important to consult a tax attorney or financial advisor before filing.

Hardship status is a subjective standard based on the taxpayer’s gross monthly income as compared to national averages of “allowable expenses”. “Allowable expenses” include necessities like food, clothing, housing, transportation, medical expenses, and insurance. “Allowable expenses” are also determined based on local standards and the size of the taxpayer’s household. Status 53 can be granted even if the taxpayer’s expenses are extraordinarily high in comparison to the national averages due to medical bills for themselves or a loved one.

Taxpayers are required to continuously provide supporting documentation for their ongoing hardship. The taxpayer is also required to notify the IRS of any changes in their financial status. Status 53 is a little-known IRS status, and may provide necessary relief to a taxpayer with an extraordinary tax burden.

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Faster Solution: Currently Not Collectible vs Bankruptcy

October 22, 2010 By

Which is a faster solution?

Currently Not Collectible status or Bankruptcy

A lot of people may wonder about whether currently not collectible status or bankruptcy is best for them. Bankruptcy is a great way to get rid of huge tax debt; however the ideal option for you depends on your situation.

Many people who qualify for Currently Not Collectible status may consider bankruptcy if they find they’re worrying excessively about any changes in situation and how it may affect their deemed ability to pay the IRS.

If you want to switch from Currently Not Collectible to bankruptcy, you need to be aware of the rules that apply for bankruptcy. If you are CNC, it is unlikely that you will be able to file for a Chapter 13 bankruptcy, since this implies your finances are in enough order to pay the IRS in monthly instalments for your owed debt. Instead, you will have to file for a Chapter 7 bankruptcy, which has a few criteria you need – the tax returns you owe for must have had a due date at least 3 years before the bankruptcy is filed and they must have actually been filed at least two years before.

In other words, if you filed your overdue returns less than two years ago, you will not be able to quality for Chapter 7 bankruptcy. Instead, your best bet is to wait until two years from the filing date has passed, and then you can apply for the bankruptcy.

No matter how long you have to wait, most of the time you will be able to file for the Chapter 7 bankruptcy in the end, since your current status as not collectible means the IRS will be ‘on hold’ with you until you can declare yourself as bankrupt.

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Tax Relief Options

September 23, 2010 By

Careful Consideration of IRS Problems Will Save You Time

It’s natural to want to resolve problems with the IRS as soon as possible. This is why many taxpayers don’t spend sufficient time thinking through their tax problems. If you have such problems with the IRS, there important considerations:

Is the way you want to solve your IRS problems possible? One of the better means of solving a tax problem is to opt for an Offer in Compromise. Prior to making this decision you must decide if you are a suitable applicant. There are specific blueprints used by the IRS to work out the amount for settlement. More often than not, their blueprint is not the same as your reality. The most common disagreement is the dissimilarity between the amount the IRS expects and your living costs. If the IRS blueprint is rigid and your living costs can’t cope with their expectation then consider bankruptcy or an installment plan.

Can the IRS seize your property? Due to the gravity, you must ascertain risk of levy and seizure. Even though it’s not common, you must negotiate with that risk possibility in mind.

The IRS has a preference for liquid assets like salaries and cash in the bank above assets without equity like bank loans, houses and cars. They must warn you prior to levying or seizing any assets. They must allow you to settle or appeal before they act. You must know if the IRS has the right to take this action prior to making a choice.

What time limit is provided by the Statute of Limitations on Collection? According to the statute the IRS is allowed a collection period of ten years beginning from the time your liability is recorded by the IRS. Careful consideration is a must as your actions during that time affects the date of conclusion. E.g. if an Offer in Compromise (or OIC) is refused the IRS gets further collection time because it takes up to one year.

If there’s only a short time before the ten years ends avoid an OIC. It is better to opt for an installment plan. A Hardship or Currently Not Collectible declaration is also preferable.

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Tax Debt Relief: Get the Facts and Know Your Rights!

July 29, 2010 By

Postponing Collection of Your Tax Bill

A ‘53’ is used by individuals who are in dire financial straits such as no employment, insistent creditors and no money. If the collector agrees he/she recommends your case is ‘currently not collectible’. He completes a Form 53. If it is accepted it is computerized and the IRS will not contact you again for at least six months. Penalties and interest keeps accruing. Once the ‘53’ period is finished the IRS process starts again. It’s not easy to get a ‘53’ approved and you will have to show documentation to prove your situation is desperate. A ‘53’ only gives you time to sort out your financial problems with the IRS. It can help you reach the ten year collection cut-off or give you time to file for bankruptcy.

Suing the IRS

If the law is carelessly treated by an IRS collector you can sue the IRS for negligence up until $100,000. If your home is taken without a court order you can sue the IS for $1 million. It is rare for a tax payer to sue the IRS because they don’t win. This means hardly any lawyers want to take on such a case against the IRS on contingency.

Highlights

  • The IRS is the most powerful bill collector and can seize your properties, bank accounts and salaries.
  • The start of the collection process by the IRS is in the form of computerized letters. If you don’t have the finances to pay, ask for more time.
  • Don’t give the IRS banking and employment details. Ask for a face to face meeting at your local IRS office instead of a phone conversation.
    Be respectful and polite to a collector but know your rights.
  • You may remain silent regarding assets but you may not lie to the IRS as it’s a crime.
  • Have your financial data in order prior to speaking with a collector and never undervalue your living costs.
  • Offer a monthly payment plan if you can’t settle your taxes in full. Penalties and interest keep accruing until they are paid up.
  • Tax debts can be done away with by bankruptcy or give more time to pay minus penalties and interest increasing.
  • Economic hardship is a reason to ask the IRS to temporarily postpone collection.

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Tax Relief: Get a Wage Garnishment Release and Clear off Your Debts

January 7, 2010 By

If you have received a letter from the IRS informing you that your wages are going to be garnished because of taxes owing and unfiled taxes, or if a wage garnishment is already in place, there are still a few options available to you. In either case, the fastest way to secure a wage garnishment release is to pay your taxes owing and to file all your returns. If this is not possible for you, you can also negotiate a monthly payment or installment plan where you will commit to paying back your taxes in full over a period of time. For many people however, a monthly plan would cause undue hardship and is beyond their financial capabilities. If this applies to you, in addition to requesting a wage garnishment release, you may also want to apply for Currently Non Collectible status.

One of the advantages of Currently Non Collectible status is that your wage garnishment release will be secured and you will not have to make monthly payments. The amount you owe, however, will still be subject to penalties and interest and the IRS can still place a lien on your property. This special status is designed to enable you to save up the amount of money you owe, and ultimately, pay it off. You will have to prove that your monthly expenses and your liquid assets are greater than your monthly income. You will also have to fill out copious forms as well as negotiate all of this with the IRS.

While you can negotiate a wage garnishment release and apply for Currently Non Collectible Status on your own, it can also be a good idea to consult with a tax attorney. Tax attorneys are well versed in income tax law and will be able to help you fill out the forms and better yet, deal with the IRS on your behalf. They can also discuss another possibility with you, which is an Offer in Compromise Settlement where you can pay off a reduced amount of taxes and be cleared of your obligations once and for all.

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How to Negotiate a Tax Levy Release and Breathe a Sigh of Relief

January 7, 2010 By

Being subject to a tax levy can be a devastating experience personally, financially and professionally. Fortunately, you can also negotiate a tax levy release in most cases. A levy can take the form of a wage garnishment, freezing and seizure of your bank account, or a seizure of your property and, if enacted, the levy will be in place until such time as your tax obligation is paid in full. You will have received a letter from the IRS thirty days before such enactment, warning you of the intent to levy and notifying you of your right to a hearing. In the case of a levy on your bank account, the funds in your bank account will be frozen for 21 days in an attempt to force you to pay your taxes. If you do not pay in this 21 day period, your bank account can be seized to pay off what you owe. If your property is seized, it can be sold off to pay your debts.

It is of course easiest to secure a tax levy release before a levy is put into place. In order to do this, you will have to either pay off your debt in full, enter into an agreement to make regular payments, or appear at a hearing to discuss your case. If you choose the latter, you will have to be prepared to prove that a levy would cause undue financial hardship for you and propose a manner to pay off your unpaid taxes in order to secure a tax levy release.

If a tax levy is already in place, the situation is a little more complicated. You will need in this instance to fill out a myriad of forms to secure a tax levy release and again either prove your case for financial hardship, or propose a method to pay off your taxes in full. If you are not able to pay off the amount that is owed, you can apply for Currently Non Collectible Status, which will ease your tax burden temporarily, or draw up an Offer in Compromise, where you will pay back only a portion of what you owe.

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Tax Relief: Does Closed Business Qualify for Not Collectible Status?

January 7, 2010 By

If you owe taxes to the IRS but your business is no longer in operation (and has no assets of value), you may wonder if you can get out of paying any tax debt owed.

Whether the IRS has pursued you about this debt before or not, it is unlikely that it will be overly interested in the business. If the business was closed in a regular, normal fashion, the IRS probably already has given it currently Not Collectible status. The IRS will not normally be interested so long as none of the assets of the business were transferred elsewhere (i.e. in order to continue operating the business unlawfully). Any notices you get from the IRS if your business was closed legitimately are probably generated by a computer and therefore should most likely be disregarded.

The IRS can come after you for some taxes however, even with Currently Not Collectible status. They can create a trust fund recovery penalty against you for any employment taxes that were not added to your employees’ pay checks (and were therefore unpaid). They have the ability to come after you for these “trust fund” taxes if they believe you were responsible for the decision to not pay the taxes. They can even come after your business for the debt, but of course, this is unlikely with the Currently Not Collectible status in place. All managers, owners etc of the business can be charged with personal liability for this debt.

The IRS can collect everything from one individual or they can collect it from many individuals. They cannot collect tax to more than 100% of what is owed. If someone else pays 100%, you will be relieved of having to pay yourself.

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Tax Relief: How you End up with Currently Not Collectible Status

January 7, 2010 By

Currently Not Collectible status is used by the IRS to refer to an individual who is unable to pay their taxes due to financial difficulties. Currently Not Collectible status refers to an assumed temporary situation; therefore it does not mean that your debt to the IRS is forgotten about. What it means is that the IRS will not issue you levies or make any attempts to collect the taxes from you until you are able to pay.

Currently Not Collectible status is issued when it is deemed that one cannot pay their debts, their assets are not valuable enough and/or issuing levies would cause what is referred to as “economic hardship”. Economic hardship is stated as being a condition where living expenses cannot be met. Currently Not Collectible status means the IRS puts a code “53″ on your account, indicating that collection activities have been suspended.

In order to get this economic hardship status, the IRS has to review your income as well as your living expenses. They will also review your assets and any liabilities you may have. For your living expenses, reviewing means comparing them to the charts they have (which cover, food, clothing, car expenses and housing/utilities), in order to see if you really do seem to be in economic hardship. If any of your expenses are too high, you will be unable to claim economic hardship. You need to be aware that you need to have no cash flow to qualify for Currently Not Collectible status. If the IRS is not satisfied that you qualify, you can be given time to adjust your expenses. Although, not everyone manages to do this to the satisfaction of the IRS, and sometimes bankruptcy is a better option in these cases.

It should also be noted that Currently Not Collectible status does not mean interest and penalties are forgiven. You will still have to pay these eventually. However, for some individuals, being a code 53 can be a good thing, because after 10 years the IRS is required, by law, to clear the balance owed and bring it back to zero.

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Tax Relief: Negotiating a Wage Garnishment Release

January 7, 2010 By

The IRS has many tactics that they can use if you have not filed your income tax or paid your taxes, including wage garnishment. There are a few requirements that have to be met before a wage garnishment can be issued: they must have assessed the amount due by completing a substitute return if you have not filed, and requested by letter that you pay-and you did not respond by doing so. A Notice of Intent to Levy and Notice of Your Right to A Hearing must have been sent at least 30 days before the wage garnishment. Although you can successfully negotiate a wage garnishment release after it is in place, it is much easier to do so before it is enacted.

In either case, the easiest way to secure a wage garnishment release is to file your taxes if you have not done so, and to pay the amount due in full. If this is not possible for you, you can negotiate an alternative solution, such as a monthly payment plan. You also have other options such as filing for protected tax-collection status, also called Currently Not Collectible status. You will need to fill out several forms to attain this status, and prove that you cannot make monthly payments. Your account will then be exempt from IRS collection strategies. You will still however, be subject to interest and penalties, as well as the possibility of a lien on your house.

While you can negotiate a wage garnishment release on your own, you can also consult with a tax attorney to help you through this process. Tax attorneys are skilled negotiators and this can mean that you will no longer have to deal with the IRS or their collection efforts if you sign a power of attorney authorizing them to represent you. They can also advise you on other options for after a wage garnishment release, such as an Offer in Compromise Settlement where you will pay only a portion of what you owe and have your debt cleared once and for all.

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Negotiate a Tax Levy Release and Get the Taxman Off Your Back

January 7, 2010 By

Tax levies can be nasty. If a levy is placed on your employment earnings or on your bank account, you may be unable to pay your monthly expenses and support your family or to continue to run your business. In addition, your bank account can be seized, as well as assets like your boat or cottage, which will be sold off to pay your tax debt. While these may be effective means for the IRS to collect what they believe is owed, levies can cause considerable hardship for you. You can, however, negotiate a tax levy release in some cases.

The easiest and fastest way to secure a tax levy release and to get the taxman off your back is to both pay off what you owe in full and file all of your outstanding tax returns, if applicable, or to negotiate monthly payments or some other form of regular instalment payments with the IRS. You can explore options such as borrowing from friends and relatives, or borrowing against your assets, to pay off your debts. If this is not an option for you, you will have to be prepared to prove that the levy causes undue financial hardship for you and in fact decreases your ability to pay what you owe or that an error has been made on your file to secure a tax levy release.

Other options that may be available to you include filing for Currently Non Collectible Status or an Offer in Compromise. While you can apply for these on your own, it may also be a good idea to consult with a tax lawyer for assistance. The great advantage of having a tax lawyer on your case to secure a tax levy release is that they can negotiate with the IRS on your behalf and you will no longer receive collection calls or letters. Many tax lawyers will also only charge you if your case is successful. Your chances of success are also greater with a professional on your side.

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