The Currently Not Collectible Plan
Sometimes, people who owe money to the IRS have no ability to pay these funds without causing themselves significant financial hardship. If this is the case with you, then you need to take steps and speak with the IRS about your inability to pay or you will be faced with an IRS payment penalty. If you do this, you may be able to qualify for a special status called currently not collectible. This is something that many people don't know about, but it can help you out if you are in a really bad financial situation.
When you are approved for the currently not collectible status, that means that the IRS will stop attempts to collect money from you. That means, they will release levies that have been placed on your bank account and stop garnishing your wages. This can lift an incredible financial burden off of your shoulders, so it's something that you should think about very carefully. You will receive an annual statement from the IRS detailing what it is that you still owe them in taxes, but this is not to be considered as a bill. It's just a reminder of what you owe them.
How to Qualify
If you think that you may be eligible to receive currently not collectible status, then you are going to need to qualify for it. It's not something that the IRS is just going to give you without a certain level of proof. In most cases, you're going to need to provide a significant amount of paperwork. You'll need to detail all of your financial statements as well as evidence of other bills or debts that you currently have. If you can provide enough evidence of your inability to pay, then the IRS may be willing to grant you this status.
Details of the Plan
Once you have qualified for the currently not collectible plan, then you will need to be aware of some of its specifics. First off, you're going to need to consider how long this plan will last. It's going to vary depending on the specifics of your situation, but you will usually have about 12 to 24 months before the IRS will want to look at your financial situation again. Once this time has passed, the IRS will take a careful look to see if your financial situation has improved and if the plan can be lifted.
If the IRS feels that your financial situation has changed enough to allow you to make payments, then they will work with you to set up a monthly installment plan. That way, you can begin to pay off your tax debt a little at a time, and you can look forward to financial freedom in the future. If, however, the IRS discovers that your monthly expenses are still in excess of your income, then you will be able to stay on the currently not collectible plan for some time until your financial situation improves.
On any IRS debt, there is a statute of limitations that says taxes may only be collected for 10 years. After this time, if they are not, then these taxes cannot be collected. If you are under the currently not collectible plan and you cannot get off of it for 10 years, then your tax debts are going to expire completely. Keep this in mind if you are trying to file for this status. Obviously you will want your financial situation to improve over time, but this may be out of your control and the currently not collectible plan may be your only option.
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