Currently Not Collectible Status

If a taxpayer is delinquent in back taxes and is struggling to pay the outstanding debt to the Internal Revenue Service, the taxpayer may apply for a Status 53 classification otherwise known as a Non Collectible Status. The IRS will require the Collection Information form to be completed. If approved, the IRS will temporarily pause their collection efforts and the taxpayer will be classified as Status 53. A Status 53 classification is imposed by the IRS and is a temporary suspension of a tax collection debt. It is only applied to those who have no means to pay their tax collection debt. The individual who owes back taxes and cannot repay the tax debt must prove the inability to pay. Among other documentation, the taxpayer will be required to provide pay stubs, expenses, a list of assets, other income sources, etc. It is best to obtain help from a tax attorney at Morehouse Law when dealing with Status 53 clients as it is difficult to prove or obtain a Status 53 classification.

There are only a few circumstances that are considered to be approved for a Status 53 classification. The IRS will consider if the taxpayer is unemployed if the taxpayer is living on welfare or disability if it can be proved that any payment towards the debt will place too difficult of financial hardship on the taxpayer or if expenses exceed income or if the taxpayer is deceased and there are no means to pay the unpaid debt through the estate. A Status 53 classification is available for one year and will automatically expire. Extensions submitted to the IRS are required if a longer-term is necessary and will only extend through the next tax year. However, it would still be necessary to prove that your financial status has not improved upon each extension request. This extension application is necessary if still more time is required by the taxpayer as the Status 53 protection will cease after one year and debt collection by the IRS will resume. The IRS will continue to send the taxpayer statements regarding the tax debt, but once the debt is in a non collectible status, there will be no obligation to pay by the taxpayer and no collection efforts will be made on behalf of the IRS.  The taxpayer will still accrue penalties and interest on the unpaid debt regardless of the non collectible status. A Status 53 classification only protects the taxpayer from the previous tax debt applied for and does not apply to any future debt. The taxpayer is expected to be and remain current with future tax debt. A Status 53 classification can be in force for as long as ten years and at that point, it will be forgiven. There is a statute of limitations of ten years from the date of approval by the IRS of the non-collectible status classification, not when the tax debt was incurred.

Filing the application for Non Collectible Status or Status 53 protection can be difficult so working with an experienced tax attorney from Morehouse Lawis recommended.  By hiring an experienced New Orleans tax attorney,  there will be no action taken by the IRS toward wage garnishments, bank levies or tax liens prior to, or during the non collectible status approval process. The Federal Government has priority in debt collection over all other incurred debts, but once a non collectible status is approved, the federal government is prohibited from garnishing wages, bank levies or applying tax liens to currently owned assets.

If, at any point, the taxpayer is financially able to pay the tax debt, the IRS will release the taxpayer from the Status 53 protection and will resume collection efforts immediately and all means of collection can be utilized such as wage garnishments, bank levies and tax liens on assets. It is conceivable that you can reapply, however, once the IRS determines your financial status has improved, you will need to exhaustively prove, once again, that you are unable to pay the tax debt due. Once a non collectible status is rescinded, it is unlikely it will be reinstated until proof of financial hardship is provided, proved and reviewed.

As all cases are unique, it is best to have your case reviewed by a tax attorney at Morehouse Law. Even from the efforts of the law firm, if the taxpayer is denied Status 53 protection, there is an appeal process to pursue through the Collection Appeal Request. Once an application for Non-Collection Status is denied and closed, the Collection Appeal Request will reopen the case for further review with consideration of new information.