Currently Not Collectible

The status of Currently Not Collectible means precisely what you think. The IRS is unable to collect on your original tax liability or on assessed penalty amounts under the following circumstances.

• Your personal income covers only your essential living costs with no remaining funds that the IRS can collect.
• You do not have valuable assets that are subject to levy.
• The IRS is not allowed to seize an asset that has less than 20 percent equity or when the cost of seizing and selling the asset exceeds the value of that equity.

Although the idea of having nothing worth taking may not be ideal, it can help when dealing with the IRS. If your account is considered uncollectible, collection activities by the IRS will be halted until your financial situation improves and another form of tax resolution becomes possible. While the IRS will not actively collect against you, interest and penalties will continue to accrue on your tax debt.

You will also be required to provide yearly financial statements to demonstrate that you are still unable to make payments. If these financial statements indicate that your situation has significantly improved, the IRS collection process may resume.

However, if the 10-year statute of limitations for back taxes expires while you are in Currently Not Collectible status, the tax debt may be permanently recognized as uncollectible and the liability may effectively be resolved.