I was contacted over the weekend via email by a taxpayer that simply does not have the financial means to enter into a payment plan (Installment Agreement) with the IRS, nor even fund an Offer in Compromise if the offer was accepted. Having recently been layed off, but also just now reaching Social Security eligibility, he is concerned that the government will seize his Social Security, leaving him utterly unable to keep a roof over his head and food on the table.
I have written before about IRS status code 53, also known as “Currently Not Collectible.” This uncollectible status is exactly what it sounds like. The IRS will review your financial condition and make a determination about your basic ability to, essentially, fend for yourself. This status lasts for 12 full months, after which time the IRS will revisit the situation to see if your circumstances have changed. If they haven’t, they will usually keep you in status 53 for another year.
If you owe a lot of money to the IRS but are essentially broke, a phone call to the IRS once a year can save you a tremendous amount of headache.
- Not everybody qualifies
- Penalties and interest continue to accrue on your tax debt
- Any substantial changes in your financial circumstances must be reported to the IRS if you are in Status 53
- You must still file tax returns every year if you are required to do so
How To Do It
- Download form 433-F from the IRS web site: http://www.irs.gov/pub/irs-pdf/f433f.pdf
- Read the instructions and fill out the form.
- Assemble copies of supporting documentation. These items generally include:
- Income: Pay stubs, pension and Social Security statements, self-employment earnings records
- Banks, Investments, etc: Statements for any and all brokerage, money market, checking, and savings accounts. Statements for all certificates of deposit, retirement accounts, stocks, bonds, and life insurance policies that hold a cash value.
- Assets: Recent statements from lenders on any loans, with monthly payment and loan balances indicated. For business assets, include UCC financing statements and copies of depreciation schedules.
- Expenses: Bills or statements for monthly expenses like utilities, rent, insurance, property taxes, telephone, child support, alimony, etc.
- Copy of previous year’s tax return
- Once you have all this stuff together, visit the IRS National Standards web site and determine your ALLOWABLE expenses: http://www.irs.gov/individuals/article/0,,id=96543,00.html
- List out and add up the allowable expenses that the IRS will give you. Note: The IRS will not grant you Status 53 if your income exceeds the allowable expenses under the National Standards.
- Call the Automated Collection System (ACS) division of the IRS at 1-800-429-7650 for individuals, or 1-800-829-3903 for businesses, and wait on hold for about 45 minutes.
- Once you reach a live person, write down their employee ID number, and state very specifically that you wish to be placed in Currently Not Collectible status.
- They will ask you a bunch of questions, most of which are directly off the Form 433-F that you filled out. You may or may not be asked to send in the form itself and all the supporting documentation. If you are asked to send it in, I suggest sending it via Certified Mail or some other trackable method.
- If you get a rude IRS employee, politely hang up and call back, then file a complaint through the next person you speak to, and make your request again.
This is a general overview of the process, and it should work for 80% of the people that might end up reading this. If your circumstances are such that your case is more difficult to negotiate, then you might want to consider professional representation, since more complex Status 53 cases tend to involve lengthy negotiations and often end up in the appeals system.