The IRS has broad powers to collect unpaid tax debts. These powers cannot collect something that a taxpayer does not have, however.
The IRS evaluates the taxpayer’s assets and income to compute the taxpayer’s “reasonable collection potential.” This analysis can show that there is no reasonable collection potential. In that case, the IRS will generally put the collection account on hold.
This can be a very favorable remedy given that the IRS has a limited number of years to collect the tax debt. In some cases the taxpayer may be able to keep this status until the unpaid tax debt is not collectible. This can result in a port of the tax liability basically being forgiven. Even then, currently not collectible status may be best used in combination with other remedies. Some of the other remedies may become more favorable as time goes by, which is why starting with currently not collectible status may be particularly useful.
There are a number of factors that have to be considered in trying to obtain currently not collectible status. We can help with this. We advise clients on IRS collections matters such as currently not collectible status daily. Please contact us immediately if you have an unpaid tax debt and would like advice on whether currently not collectible status may be appropriate remedy.