You may not have to pay the IRS a dime if the IRS marks your account uncollectible. IRS authority for marking an account “uncollectible” is found in IRS Policy Statement 5-71, and it states that if after pursuing the collection process the IRS determines that the account is currently not collectible, this should be reported in order to remove the taxpayer from active collection. This is also called the hardship program.
Currently not collectible status occurs when the IRS agrees that repayment would create an economic hardship. It is forbearance by the IRS, and a break from enforcement that can last years – or until the time expires for the IRS to collect the tax.
Currently not collectible status is a permanent tax solution for many citizens when the status lasts long enough to “run out the clock” on the time allowed to collect the tax. Or it may prove to be a valuable temporary tax solution that provides much needed breathing room allowing the taxpayer to come up with a permanent solution, like bankruptcy or partial pay or an offer in compromise.
So how do you become uncollectible? The IRS will look at your income, expenses and your property. After paying expenses like rent, car payment, medical expenses, food, etc., there is no money left to pay the government. And if you have little or no equity in your property, this factor weighs in your favor.
People are uncollectible who don’t even know it. It’s an overlooked tax solution that many citizens should consider.
Get a free copy of the Faith Firm book, How to Get Tax Forgiveness. It will shed some more light on solving tough tax problems using hardship and other tax solutions.