How to Request Currently Not Collectible Status

To acquire Currently Not Collectible status, you or your tax expert should contact the IRS. You can always contact the IRS by writing them or calling them. However, it’s most often faster to interact with the IRS by phone. That way, the IRS can tell you accurately what you need to confirm your financial hardship. Also, having your financial information readily available will make the process go much faster. Financial information you’ll need includes evidence of your income and expenses. You can fax these documents straight to the IRS during the call. If you provide the IRS with all that they need immediately, you’ll get an immediate opening decision. Currently Not Collectible status may not last forever. The IRS will continue to review your financial situation each year to see if it improves. If they determine you can pay your taxes again, they will make you pay. The IRS will contact you if they need more current financial details about your Currently Not Collectible status. If you’re considering applying for Currently Not Collectible status, get a professional opinion from tax relief professionals first. Expert tax defenders can work with you to assess your financial situation. They will help you determine whether you’re a likely candidate for Currently Not Collectible status. For a taxpayer to be eligible for Currently not Collectible designation, they must show financial hardship. Financial hardship is a condition the person has no money left over after paying for basic living needs. The taxpayer would have to show evidence that paying their tax debt would create severe economic hardship for them. A severe economic hardship is more than a slow down or financial inconvenience. You can be determined as Currently Not Collectible if: ·  Your income wages envelop no more than what you need to get by.  When your income pays for just what you need to get by, there’s no money left for the IRS to garnish. ·  There are no possessions you own, such as valuable property that would be worth the IRS levying. The IRS cannot seize any assets from the taxpayer if they have less than 20 percent equity in the article. Also, the IRS can’t seize assets if the collecting cost is worth more than the asset. There are basically four steps to placing a Currently Not Collectible order. The steps include:
  • Gathering your documents and make a pre-selection.
  • Filling out a financial statement.
  • Analyzing the financial statement and
  • Sending it to the IRS for review.

Step 1: Gather Documents and do a pre-check

Make sure you have the following documents. Request copies if you are missing any. The documents include:
  • Bank statements for the past three months
  • List of all assets and their market values
  • Tally of all income and monthly living expenses, with copies of invoices and receipts
  • Proof of payment for all significant out-of-pocket medical expenses
Pre-checking includes a review of your level of withholding tax on wages and pension payments so that you will not have to pay a balance when your next tax return is submitted. You will also want to analyze the level of estimated taxes on self-employment, agriculture, or business income. Are these estimated payments sufficient to avoid what is due when your next tax return is filed? The IRS wants to make sure that you are not going to be incurring additional tax debts going forward. The first rule is to get out of debt with the IRS. The IRS also wants to make sure all of your tax returns are filed. They will want to know if any returns, even without unfiled, will have any balances due or if they will result in repayments.

 Step 2: Complete the Financial Statement

Complete Form 433-A, Information Collection Statement for employees and self-employed individuals, or Form 433-F, Collection Information Statement. Both request similar types of financial data. Choose one and work with it from top to bottom. Fill out one of these forms and take it with you, along with three months of bank statements, if you meet with and plan to hire a tax professional for assistance. Completing the 433 form requires you to:
  • Make a list of everything you own, including bank accounts, investment accounts, retirement accounts, cars, trucks, motorcycles, boats, real estate and life insurance.
  • Estimate market value for these assets.
  • Track how much income you’ve made in the past three months.
  • Control your spending over the past three months.

Step 3: Analyze the Financial Statement

Calculate your monthly income, necessary expenses, and what is left over after paying basic expenses. This is the amount of money that you could remit to the IRS for paying taxes. Set up a spreadsheet or paper work with four columns. In one column, write down all expense categories, as shown on Forms 433-A or 433-F. Record your actual expenses in each category in the second column. Enter the relevant financial collection standard for each expense category in the third column. Finally, notice the lowest number from column two and column three in the fourth column. The IRS will prevent any expenses significantly greater than the relevant collection financial standard; unless it can demonstrate that the additional expense is necessary for you and your family “health, well-being and / or income generation.” The IRS will also expect you to provide proof of payment so that they can verify the expense amounts.                    Finally, calculate net disposable income by taking total monthly income minus allowable expenses. Subtract all allowable expenses from your total monthly income to estimate what the IRS expects you to pay toward your unpaid tax debts.   The IRS will expect you to set up an installment agreement to pay $ 100 a month, if you have $ 100 left over after paying necessary expenses.  

Step 4: Submit the Financial Statement to the IRS

Submit your paperwork to the IRS and ask them to determine if your account can be located in a currently non-collectable state.                 
  • Completed Form 433-A or Form 433-F
  • Three months of bank statements
  • Proof of payment of any unusual or large expenses, such as medical expenses
  • Access to fax machine in case the IRS wants you to fax them documents
  • A notepad or tablet for taking notes
Note the time and date of your call, the badge number of the IRS agent you spoke with, what was discussed for example about financial statement , and the result of the call, such as the verdict or any follow-up information from the IRS.
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