Uncollectible Status – IRS Tips and Help

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Determining IRS Uncollectible Status or Offer in Compromise

Another solution that can be a great benefit, given the right set of circumstances, is Uncollectable Status.  While you hear a lot about the solution called an Offer In Compromise (offering the IRS less than you owe), most people haven’t even heard of IRS Uncollectable Status.  The IRS calls it Uncollectable Status (status 53 or hardship status).  But whatever they call it, in essence, it is like the IRS is putting a long-term hold on your debt.  You still owe the money, but the IRS agrees to leave you alone until you get on your feet, or the debt gets so old the Statute of Limitations runs out and you no longer owe the debt.

When our Denver professionals are analyzing your situation to find what is the best tax resolution for you, we investigate several considerations about your personal situation.  We look at your personal circumstances, such as your age, the age of the IRS debt, and your assets.  All these affect what solution is best for you and whether Uncollectible Status is the best solution for you.

If you are not able to pay off the IRS, we look at these factors.  If you are young and healthy, we often look harder at doing an Offer In Compromise rather than requesting IRS Uncollectable Status.  If you are young, and the IRS has a long time left on the statute of limitations for collection, it’s likely that your inability to pay isn’t going to be long term.  As a younger person, you are more likely to earn enough money to get on your feet, in which case the IRS reserves the right to start collections again later. If that same young person instead did an Offer In Compromise and settled the debt, even if the person made a ton of money later, the IRS couldn’t touch it. So, while the circumstances could have allowed the solution to be uncollectible, the better solution would be an Offer In Compromise.

On the other hand, let’s say it was an older couple that owed the money.  If they were either on Social Security or some other retirement benefit, or at least close to receiving those benefits, perhaps Uncollectable Status with the IRS would be better because their income would be staying the same or going down.  If there is no increase in income on the horizon, then the IRS would likely not restart collections and when the Statute of Limitations on collections expired, the tax would be completely eliminated!  Having the taxes go away completely with no payment would be a better tax resolution than an Offer In Compromise, where some type of payment would have to be offered.  In addition, if the older couple (or even the young person in the prior example) owned a significant asset, such as a home with lots of equity, the IRS would not accept an Offer In Compromise, because they could take the house and get paid in full.  In this circumstance IRS Uncollectable Status could be the better solution, because in most cases the IRS would allow you to keep your home.

Any time the taxes are very old, we would want to review the Statute of Limitations to determine if the debt was going to expire soon.  If so, then young or old or anywhere in between, we would want to take a very detailed look at Uncollectable Status.  Any time the debt will just vanish soon due to the Statute of Limitations expiring, this is a top contender for Uncollectable.  One of the disadvantages of an Offer In Compromise is that it extends the Statute of Limitations for collections.  IRS Uncollectable Status DOES NOT extend the statute for collections, so can be the most beneficial solution even if you qualify for both.  You have to admit that if the taxes will just go away on their own, it’s hard to find a better solution!  Uncollectable Status could be the vehicle to facilitate that!

Many tax resolution Denver companies will use Sales People who are paid a commission to upsell you  expensive options.  Do you really want someone who could be self-serving and padding their own pockets to determine how to fix your problem with the IRS?  Even if you qualify for one solution, like an Offer In Compromise (that gives a high sales commission check for a salesperson), it may not be the BEST solution.  You have a lot to lose if you choose someone who is only trained on how to collect a commission check rather than a professional who will guide you through this process.  Our Denver based professionals are all salaried employees who do not receive a commission for “upselling” you. In fact, they do not receive a commission for any services they provide! Please check out the full bios of the professions we have on staff and you will see that the person you meet for a free initial consultation is not only licensed professionally but also has been qualified by outside organizations, such as the American Society of Tax Problem Solvers and/or the National Association of Enrolled Agents to prove competency in understanding these complicated rules.  The cost for an initial consultation to discuss your IRS uncollectable status situation with our professionals is the same as what you would pay for an unlicensed and unqualified “sales person”.  Absolutely Free.  

 

 

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