In bad economic times, few of us have any extra cash laying around after we pay our monthly living expenses. If you can’t pay yourtax debt and can prove it – the IRS will stop attempting to collect the debt from you (at least temporarily) .

Non-Collectible Status

The IRS does not want to waste it’s time in pursuing collection from taxpayers who clearly cannot pay their debts in full.

If you are able to prove that you have no assets to satisfy your tax debt and that you do not have any excess income after paying your monthly necessary living expenses, the IRS will place your delinquent account in what is known as “non-collectible status.”

In order to get your account placed in non-collectible status you must provide IRS with detailed financial statements supported by bank records and other information proving your inability to pay.

Sometimes, a taxpayer can remain in non-collectible status until the statute of limitations on collections runs out (the statute of limitations refers to the amount of time the IRS can legally collect the debt). If the statute runs out before the IRS has collected the debt, you don’t have to pay.

Does Non-Collectible Status Mean the Debt is Written Off?

Not exactly. In non-collectible status, the tax debt remains uncollected and the IRS will periodically monitor the taxpayer’s subsequently filed tax returns to determine if there is any positive change in the taxpayer’s ability to pay the tax debt.

It does not mean that your tax debt has gone away; nor does it stop the IRS from filing a federal tax lien against you. It merely postpones collection – sometimes indefinitely.

Offer in Compromise

Have you considered an offer-in-compromise? The offer-in-compromise is a program designed to eliminate tax debt by paying a settlement amount – sometimes far less than you may owe.

The procedures for getting an offer accepted are similar to getting your account placed in non-collectible status. Simply stated, your making a settlement offer to the IRS in exchange for releasing your tax debt permanently.

There are no periodic reviews of your future income, no consideration to assets you may acquire in the future through inheritance or otherwise, no consideration to any increases to future income. You’re done! Permanently!