There are various IRS debt payment programs that are made to suit the various needs of taxpayers. One payment plan that does not involve any payment of a tax debt, and removes the threat of IRS collection actions is the Currently Not Collectible program. Taxpayers facing economic hardship can apply to this IRS program to postpone the payment of tax debt until a later date.
If a taxpayer does not have the funds to pay their debt, they can explore the qualifying factors of the Currently Not Collectible program to ensure their eligibility. Although there is no standard threshold for qualifying, eligibility depends on numerous factors, including a taxpayer’s financial condition, employment status, and health.
IRS Debt Resolution: Qualifying Factors
All IRS debt payment plans have strict restrictions. Plans that limit payments or reduce the overall amount like an Offer in Compromise are attractive to most taxpayers. The IRS charges a penalty for applying for a payment plan for applications that clearly do not qualify So, it is advisable for taxpayers to consult a tax specialist before applying for any debt payment plan.
The most important qualifying factor of the Currently Not Collectible program is the financial capability of the taxpayer applying. The IRS will request to review the details of all the income sources and assets of the taxpayer in order to judge their ability or inability to pay. It is only if a taxpayer does not have the capability of paying the tax debt, including taking loans to fulfil the debt, will the IRS may consider the proposal further.
Other factors the IRS considers when reviewing a Currently Not Collectible request are:
- duration of the unemployment
- reason for unemployment
IRS Debt Payment & Clearing Currently Not Collectible
After taxpayers have qualified for the Currently Not Collectible program, collection actions and demand for payment of tax debt will halt until the taxpayer’s next financial review. As the IRS waits for the financial condition of taxpayers to improve, they periodically keep checking the taxpayer’s situation for improvement.
Even though taxpayers will only get temporary relief under this IRS debt payment plan, if there is no improvement in the situation of taxpayers, the IRS may consider other options, such as reducing the debt amount substantially or forgiving it. If the IRS finds that a taxpayer’s situation has improved, enabling them to pay the tax debt, the status of the program is reviewed accordingly.
It is to be noted that qualifying for Currently Not Collectible does not mean the IRS cannot place a lien on a taxpayer. The IRS retains that power and may use it in cases of non-compliance. Taxpayers should consult a tax resolution company or a tax professional before applying for any IRS debt payment program.