How to Settle 'Currently Not Collectible'

There are many ways to settle your tax debt with the IRS, but what if you can't afford to make any payment at all? Let's say that you have tax debt and you want to pay it, but you've lost your job. You don't know anyone who would be willing or able to lend you money, and you can barely afford food once you use your unemployment check to pay the rent and bills. Even paying a small amount to the IRS would cause you quite a hardship. The debt is weighing on your mind, but you're not sure how soon you'll be able to find a job. The economy isn't great and you know that your old friends from work are struggling to find jobs, even those who have more skills and experience than you do. It's an impossible situation, right?

Luckily for people who have tax debts, but have fallen on very hard times, the IRS offers an option referred to as ""currently not collectible."" First, you must obtain IRS Form 433-F, the Collection Information Statement. You can get this form from a tax professional. Even if you cannot afford help from someone knowledgeable on tax law, you can pick up a form (for free) at a tax pro's office. Then, either you or your tax professional will need to submit the form to the IRS by faxing or mailing it.

Receiving Your 'Currently Not Collectible' Status

Once the IRS reviews your form and determines that you are not able to pay at this time, they will declare you "currently not collectible." At this point, the IRS must stop all attempts to collect the tax debt. This includes phone calls and letters, as well as more serious debt collection practices such as levies and garnishments. You will finally be able to relax without harassment.

When you are declared "currently not collectible," you have one full year free from your tax debt obligations. However, you will need to re-submit your status each year. You can do this when you file your income taxes each Spring. Once you are back on your feet, you can begin to pay off your tax debt, using one of the various other IRS payment plans. However, if you remain unable to pay for a period of ten years, your tax debt will expire.

If at all possible, it is best to consult with a tax professional, such as a certified public accountant or a tax attorney, when dealing with tax debt. If you don't follow the IRS's procedure, it could cost you time and money. If you are being declared "currently not collectible," you probably don't have extra money to spare, but hopefully you can find a tax professional who will work with your budget. It's worth it when dealing with the IRS!

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