You owe taxes. But you can’t pay. You’re barely making ends meet with basic living expenses. Especially in high cost-of-living places like Agoura Hills, Thousand Oaks, Oxnard and Ventura. You don’t want to file for bankruptcy, or you don’t qualify (many kinds of taxes can be discharged in bankruptcy with a few exceptions). What to do? If you have relatively few assets (that the IRS would demand you liquidate to pay them) and modest income, then ask the IRS for Uncollectible Status. Uncollectible Status is a 1-2 year period where the IRS stops trying to collect from you.
How to Request Uncollectible Status in Ventura County
Call the IRS phone number on the top of the IRS collection notice you received, or 800-829-7650 to request Uncollectible Status. Warning: the IRS is dreadfully understaffed, so you are likely to be on hold for quite some time – often an hour or more – before an agent gets to you.
What to Say When Asking IRS for Uncollectible Status
Once you’ve reached an IRS Agent say: “I cannot afford to pay my taxes currently because _______ (describe your financial circumstances – unemployment, divorce, bad sales year, etc). Can you please make me uncollectible?” The IRS Agent is likely to ask a lot of questions about your financial circumstances. Answer patiently and honestly: it may feel intrusive but the Agent must ask because Congress has given the IRS the legal authority and obligation to collect lawfully owed taxes. In short, the Agent is doing their job, not trying to annoy you, even if it feels that way.
There’s a 50/50 chance the Agent will ask you to fill out and submit Form 433A, Collection Information Statement (you can find it here) in order to process your Uncollectible Status request. This form asks for all your assets, debts and living expenses. The IRS is verifying that you currently make only enough money to be able to live; they need to ensure there’s no “extra” money in your budget with which to repay them. There’s also a 50/50 chance the Agent will grant Uncollectible Status over the phone, although they almost always need to get approval of their decision from their supervisor.
If Uncollectible Status is Denied, then Installment Agreement Follow
If you are asked to fill out a Collection Information Statement, it will take 4-12 weeks to hear back. Requests for Uncollectible Status are often granted. If your request is denied, however, then the IRS’s response will be to put you into an Installment Agreement. They’re saying they think you actually can make some payments on your tax debt, and will tell you how much they expect you to pay them monthly.
How Will IRS Contact Me Regarding Uncollectible Status?
You will only hear back from the IRS by mail; no agent will call you when Uncollectible Status is approved or denied. Once you’ve received Uncollectible Status, the IRS will leave you alone (stop sending Collection Notices) for 18-36 months. Then they will contact you by mail for the current information on your financial circumstances.
Does Uncollectible Status Take Away My Tax Liability?
No, uncollectible Status does NOT take away your tax liability. You will not only still owe the IRS the full amount, but interest and penalties will also continue to accrue on your tax debt. Every 1-2 years the IRS will ask for your financial information, to determine whether to continue you on Uncollectible Status. However, there’s a 10-year Statute of Limitations for IRS collection actions. In other words, if you receive Uncollectible Status for 10 consecutive years, then that tax year’s debt expires.
If you need help getting Uncollectible Status, or have questions about it, give me a call at 818-889-8080. We’re happy to answer questions.
February 1, 2023