IRS Non-Collectible Accounts
Policy Statement 5-71 (aka P-5-71) grants the Internal Revenue Service (IRS) with the authority to report accounts currently not collectible. When an account is deemed currently not collectible, accounts can then be removed from collections altogether until the account is up for review where it is determined whether the currently not collectible status of the account has changed. This is clearly beneficial to the tax debtor because as long as the account remains currently not collectible, the IRS will not attempt to collect the tax debt. This means no Notice of Federal Tax Levy, no seizure or garnishment of assets, and no headaches from the IRS. That said, there are a discrete and distinct set of reasons or bases for deeming an account currently not collectible, and a tax debtor’s account must fall into one of these categories in order for their account to be deemed an IRS Non-Collectible Account.
The usual way in which an account is deemed currently not collectible is through the filing of IRS Form 433-F, Collection Information Statement. This form will show the IRS that the tax debtor is indeed incapable of satisfying his or her tax obligations. The IRS will then send an annual notice to the tax debtor informing him or her of the outstanding tax obligation, but because the account has been taken out of collections, will not attempt to collect the amount owed. This will be the case unless a subsequent review of the file indicates that the tax debtor is indeed capable of meeting his or her tax obligations. That said, there are other ways in which an account can be deemed currently not collectible, including the IRS’ inability to locate the tax debtor and/or the tax debtor’s assets, a partial or complete expiration of the tax assessment, or where the tax debtor is abroad and as a result the IRS cannot collect. Internal Revenue Service, Internal Revenue Manual 22.214.171.124, Currently Not Collectible, available at https://www.irs.gov/irm/part5/irm_05-016-001r.html#d0e95.
While the deeming of an account currently not collectible will certainly buy a tax debtor some time when it comes to meeting his or her tax obligation, it is not a panacea, namely because a subsequent review of the tax debtor’s account could result in a reinstatement of the tax debt with IRS collections as well as subsequent collection efforts by the IRS. If you have questions about currently not collectible status, you should consult an experienced tax attorney.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.