The IRS understands that not every past-due account is going to be able to pay at any given time. To help them distinguish between accounts that are worth pursuing — and ones where it may make the most sense to put collection actions on pause — they will apply a status to the account, designating it as “currently not collectible.”
Instant Tax Solutions can help you request that your account be designated as currently not collectible, and we can also help you explore your options for other forms of relief. We have helped thousands of individuals and businesses across multiple states in their efforts to get out from underneath tax debt.
Let us help you explore all of your options for finding relief and regaining financial freedom once more. Schedule a free case review and accounts review today when you call (888) 363-8958 or contact us online.
What Does it Mean for Accounts to Be in Portland IRS Currently Not Collectible Status?
The IRS’s currently not collectible status acts similar to an automatic stay in bankruptcy, albeit with some crucial differences. Any account placed in currently not collectible status will not have any new actions taken against it, including bank levies, wage garnishment, or repeated notices asking for payment for the past-due balance.
At the same time, the tax is still very much due. Any penalties or interest will continue to accrue.
The IRS may also apply a lien to certain properties to protect their interests in the possible future sale or transfer. The IRS will still collect any payments that would constitute a tax refund and automatically apply them to the past-due balance.
Further, the status of the tax as unpaid can still affect things like bankruptcy proceedings, divorce proceedings, and certain determinations of creditworthiness.
In other words, while “currently not collectible” offers some form of relief from the pressure of back taxes, make no mistake that they never go away. Further, the IRS evaluates accounts placed in currently not collectible periodically — at least once every year.
One important reason to seek currently not collectible status is, quite obviously, because you genuinely have no ability to pay currently, and so receiving repeated messages and requests for payment is just pointlessly stressful.
Often, the IRS will pursue funds from filers with unpaid taxes using methods like bank levies, wage levies (wage garnishment), property liens, liens on accounts receivable, and other methods. You may also wish to request that your account be designated as currently not collectible so that the IRS will not escalate collection actions.
If you can prove that your current assets only barely cover your living and operating expenses — or that efforts to collect anything will jeopardize your ability to earn income and pay off back taxes in the future — then the IRS may “ease off” and delay any collection actions until your account status changes.
Why IRS Currently Not Collectible Status Is Not a Cure-All
Being in currently not collectible status can give you some breathing room, but it should never be thought of as a permanent solution.
Most importantly, the past-due tax balance will continue to add additional penalties and interest, even when other actions by the IRS are paused. Penalties and interest are added to encourage payment and to increase the negative consequences of leaving a balance unpaid for an extended period of time.
Being designated as currently not collectible will also not inherently stop or remove IRS collection actions that have already taken place. Filers in this situation must either work out an agreement to repay tax debts or they must make individual hardship requests for each levy, lien, or other collection action they face.
On top of this, “currently not collectible” will only refer to unpaid taxes from past periods. It will not apply to any current tax obligations that are being assessed for next year or for your next quarterly estimated payment submission.
Ultimately, having a past-due balance that lingers is simply not good for your financial health. While there’s nothing wrong with wanting a temporary pause on IRS collections, remember that it is just that: a pause.
You will ultimately need to find a solution to pay off your taxes, and the good news is that you may be able to do so without paying the full amount owed. Instant Tax Solutions can help you determine the optimal path for moving forward and relieve you of as much of your tax balance as possible.
Options for Finding Tax Relief in Portland
In addition to making a request to temporarily delay your tax collection process, you have many other options for seeking tax relief at your disposal. Instant Tax Solutions can help you weigh each option and determine the most appropriate form of relief for you.
Common forms of relief we help our clients obtain include:
- Penalty removal/abatement
- Revised return (or collection due process hearing)
- Offer in compromise
- Bank levy release
- Lien removal
- Installment agreements
Penalty Removal and Abatement
Many people don’t realize that the IRS provides multiple options for removing penalties. Since these penalties can substantially increase the size of the taxes you owe, having them removed can make repayment that much easier.
Penalties are most commonly removed through a first-time abate. To qualify, you must have been current on every other tax payment and return filing for the past three years, and you cannot have had any penalties assessed in that time.
If you meet these qualifications, the IRS may automatically remove certain penalties. Other reasons for penalty removal include administrative waiver, statutory exemption, and any other reasonable cause.
Revised Return, Collection Due Process Hearings
In some cases, the amount of taxes the IRS says you owe may not be accurate. Instant Tax Solutions can help you correct the amount you owe, including by helping you look at your past three years of returns for opportunities to revise them (you can file an amended return within the past three years).
Also, you may be able to dispute the amount you owe through a collection due process (CDP) hearing. These hearings are an important opportunity to call into question the IRS’s assessment, their following of proper procedure, or any other events that resulted in improper tax assessments, penalties, or collection actions.
Offer in Compromise
An offer in compromise is essentially a settlement agreement made between you and the IRS. You offer to repay your tax debts through a short-term or long-term agreement, and in exchange, the IRS may give you a break on the actual amount you owe.
Offers in compromise are only provided for those who can demonstrate that they would be otherwise unable to pay the tax debt in full. Making an offer can be complicated, and to maximize its chances of acceptance, it helps to understand the criteria and documentation the IRS looks for.
Further, you must make a partial payment up-front, and this payment is non-refundable if your proposal is rejected (it gets added to your existing tax balance). Therefore, it can be highly beneficial to work with experienced tax professionals like Instant Tax Solutions, who can help you determine the best offer to propose to the IRS, given their expectations and your personal financial situation.
Bank Levy Release and Lien Removal
IRS bank levies and other forms of levies can sometimes be removed when the filer is able to demonstrate that the levy creates an unreasonable hardship. If, for example, the levy would make it impossible for the filer to cover their living/operating expenses, or if the levy would make it even less likely that the tax debt would be repaid, then the IRS is often willing to grant a release.
Liens are much harder to remove, as the IRS generally feels that they are less of a burden since they do not constitute a guaranteed asset seizure. Still, you can request that the notice of the lien be removed from public records, which can improve your ability to receive credit or make other financial transactions that the lien might affect.
It is generally best to avoid liens and levies by proactively working with the IRS, either by forming a plan to repay or by asking them to designate your account as currently not collectible. Nevertheless, Instant Tax Solutions is here to help you explore every option available to release the pressure of IRS collection actions.
An installment agreement is one of the IRS’s most preferred methods of repayment, aside from timely payment, of course. That’s because it all but guarantees repayment, it doesn’t force them to give up any amount of the balance, and it allows them to continue to apply penalties.
Even still, this method of repayment is the best option for those who do not qualify for an offer in compromise. Instant Tax Solutions can help you set up an ideal repayment plan that places a minimal burden on your day-to-day operating finances but also minimizes the penalties and interest you ultimately pay.
Expiration of the Collections Statute of Limitations
Technically, the IRS only has ten years to collect a debt. The clock on this period starts ticking the moment the tax is first officially assessed.
Tax assessments are typically made when a tax return is filed, when the IRS creates a return for someone who has not filed in several months, or when an audit or other account review reveals a new balance.
The ten-year time period is paused when the delinquent filer enters into bankruptcy proceedings or negotiations with the IRS. The time period may also be paused or extended for other reasons.
Crucially, the expiration of the statute of limitations does not mean that the tax debt is forgiven. The IRS simply won’t put any of its time or efforts into seeking the balance anymore.
They may, prior to the expiration, do everything they can to collect some of that debt. That may mean new tax liens for anyone who owes more than $10,000, for example.
Having an outstanding balance with the U.S. government can also affect other things, including your compliance with federal law or your designation of creditworthiness. You may also have the unpaid debt brought up during bankruptcy proceedings, future offers in compromise negotiations, collection due process hearings, and other important processes.
Put simply, you can end up on the IRS’s “bad side” in ways that affect your ability to find relief in the future if your taxes were never paid.
Get Help Receiving IRS Currently Not Collectible (CNC) Status With Portland Tax Relief Assistance
Instant Tax Solutions is a highly experienced and trusted tax relief and accounting agency. We can represent you directly in negotiations with the IRS, and we can apply our decades of collective experience to reviewing your accounts in order to find any and all forms of relief available.
When you are ready to find out more about how to get relief from your past-due taxes, we are here to help. Reach out to us at (888) 363-8958 or contact us online to schedule a free, no-obligation case review and accounts review with our tax experts today.