IRS Non-Collectible Status: What it means and do you qualify?

When you owe money to the IRS and cannot pay it in full there are generally 3 non-bankruptcy options available to you:

  1. Make a settlement offer known as an Offer in Compromise;
  2. Request an installment payment plan; and
  3. Request that your account be placed in non-collectible status.

Non-collectible status

The IRS does not want to waste it’s valuable resources in pursuing collection from taxpayers who clearly cannot pay their debts in full.

For this reason if you are able to prove that you have no equity in your assets and that you do not have any surplus income after paying your monthly necessary living expenses, the IRS will place your delinquent account in what is known as “non-collectible status.”

The IRS code for this status is “53” and, therefore, it is sometimes called 53 status.

Full financial disclosure required

IRS Financial Statements must be provided along with bank records and other and financial information proving your inability to pay.

It is not uncommon to have a taxpayer remain in non-collectible status until the statute of limitations on collections runs out.

Non-Collectible status does not mean the debt is written off

Non-collectible status is not the same as a write-off of the debt. The tax debt remains on the books and the IRS will monitor the taxpayer’s subsequently filed tax returns to determine if there is any positive change in the taxpayer’s ability to pay the tax debt.

Non-collectible status merely means that the IRS has determined that enforced collection action would be fruitless at this time.

It does not mean that your tax debt has gone away and it does not preclude the IRS from filing a federal tax lien against you.

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