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STOP THE IRS FROM COLLECTING ON YOUR TAX BILL

If you owe the IRS money and your situation is bleak, ask the IRS to put you into “Currently Not Collectible” status. Sometimes this is also referred to as number 53. If the IRS agent agrees, then he will recommend that your balance be classified as “Currently Not Collectible” or “Hardship” status. The reason they call it number is 53 is because that is the IRS form number: 53. If you are approved for Currently Not Collectible status, then you are placed in the computer as not collectible for the time being. Once you are placed into Currently Not Collectible the IRS should leave you alone for around six months, but keep in mind that interest and penalties will continue to add on to your debt. Once the grace period expires, the IRS computers will then bring your file back to the top and you will have to start all over again.

Also keep in mind the IRS doesn’t generally grant hardship status without looking into your financial situation in detail. Although I have, on occasion, been able to get clients placed into Currently Not Collectible status without a great deal of difficulty, as a general rule, the IRS will want you to complete a Form 433, which is essentially a personal financial statement listing your assets, your debts, your income, and expenses.

Being classified as Currently Not Collectible can be a very good thing but keep in mind that it does not permanently solve your IRS problem; it just puts it off for another day. So, who should put themselves or have a professional place them into Currently Not Collectible status? As always, it’s a case-by-case basis but, in my opinion, it’s generally best for elderly people who do not care that their tax bill will never be wiped out and know that their financial situation will never change. For example, a man came to me owing the IRS $80,000. He was receiving $1,200 in Social Security benefits. He was 77 years old. He was satisfied with his living arrangements. I explained to him that if his financial situation never changed the IRS would probably keep him in Currently Not Collectible for the rest of his life. He was satisfied with that. However, if you are a 35-year-old with job skills, being classified as Currently Not Collectible is probably not a good idea because while it might buy you some time, the IRS is adding to your debt every day and then when you come out of Currently Not Collectible status you end up owing more than when you started.

Another positive, though, is that while you are in Currently Not Collectible status, your statute of limitations continues to run. So there are some situations where you may want to use it to simply buy time.