Currently Not Collectible or hardship status
a temporary solution to an IRS problem.
A little known rule from the Internal Revenue Service can be very helpful to many tax payers who owe money but cannot afford to pay it back. At least they are not able to pay it back at the current time. Called Status 53, this is a status given to people who owe money, but the debt is considered currently not collectable by the IRS. Of course, there are standards that a person must meet in order to qualify for this type of status; however, if you are one of these people, it can save you money and give you a chance to recover from your financial situation.
If you find yourself unemployed or perhaps you have just lost your business, you may not have the money to pay your back taxes. If you can qualify for a Status 53, the IRS will suspend any collection attempt they are making until such time as you are back on your feet and making enough money that you can afford to pay the debt. If your wages are currently being garnished, this too will be suspended.
In order to qualify for the status of currently not collectable you will have to document this for the IRS. They will want to see exactly how much income you have as well as your expenses. It is not necessary to have no income to qualify for this status with the IRS, but you will need to show that you have no money left over each month to pay the debt you owe the IRS. A low income, though, is not enough. They will also want to see a balance sheet, or at least a list of assets. If you have certain assets that they deem to be unnecessary, you either will not qualify or be forced to sell them to pay a part of the debt you owe.
At that point, you may qualify for Status 53 for the remainder of the debt. Some assets will be exempt from this analysis. A retirement account is one such example. Having a tax attorney with experience filing for Status 53 is critical when applying for this status. It will save you time and money knowing which, if any, assets will need to be sold before qualifying.
Keep in mind that this law is designed to be a temporary measure, so a person can recover financially. The tax debt does not go away; it is simply frozen for a period of time. The minimum amount of time you will be allowed to have your debts suspended will be one year. The IRS will monitor your tax returns each year and if they determine that you are making enough money to begin paying your debt again, they will ask for current financial information. The upper limit on the suspended status of your debt is directly related to the statuette of limitations on this type of debt. Although this is a great law to take advantage of and is very helpful to many people, you should not attempt to qualify on your own. A good tax account or attorney with experience with this law will help increase your chances of getting approval substantially.
As a local Attorney serving Utah and concentrating in IRS Problem Resolution, I can help you decide if Hardship status is the right solution to your IRS tax debt problem. Please call Gilland Law Firm, P.C. for your free consultation at (801) 444-9302 or email Attorney Jim Gilland for your free IRS Tax help consultation.