What is “Currently Not Collectible” Financial Hardship?
When the IRS determines that a taxpayer’s income is so low that they have no income at all to make payments and assets cannot be accessed without causing a hardship, they classify the tax debt as “Currently Not Collectible” Financial Hardship. The debt is still owed, but they no longer attempt to collect on that debt. Eventually, when the tax debt reaches the statute of limitations it is no longer owed.
How does “Currently Not Collectible” Financial Hardship work?
The taxpayer’s entire financial situation is evaluated in light of the IRS Collection Financial Standards. These IRS Collection Financial Standards outline national and local standards standards for housing, utilities, transportation, food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous expenses. If the allowable expenses exceed the taxpayer’s income, the IRS will acknowledge this and no longer pursue collection of that tax debt while the taxpayer remains in that financial situation. The taxpayer’s credit is not negatively affected during this time. When the statute of limitations is reached, the tax debt disappears and is no longer owed. The statute of limitation for a tax debt is 10 years from the date of filing or assessment that resulted in the debt.
Will assets keep me from qualifying for “Currently Not Collectible” Financial Hardship?
Maybe, but if accessing those assets will put you into a financial hardship such that it would demonstrably increase your “allowable expenses” beyond your current income, the taxpayer may not be expected to liquidate or surrender those assets.
Who is eligible for “Currently Not Collectible” Financial Hardship?
Those without the income to pay off their tax debt or the ability to access assets that would pay off the debt.
Who is not recommended for “Currently Not Collectible” Financial Hardship?
Those with above average income and/or accessible assets or those who expect their financial situation to substantially improve before the tax debt would reach the statute of limitations.