There’s an old saying that “you can’t get blood from a stone.” It is often used in the context of collections, when a debtor simply does not have the funds to pay a debt.
The IRS has its own equivalent of this; it is called non-collectible status. In this post, we will provide an overview of this status and how it can help you when facing tax debt.
To be sure, the agency must follow proper procedures when trying to collect from you. These are procedures known as Collections Due Process (CDP), involving notices, the chance for a hearing and so on.
But if those procedures are properly followed, and you are delinquent on your taxes, the IRS can take steps to take property from you to pay the debt. We discussed an example of this in December 23 post, on the seizure of an annuity belonging to former baseball star Darryl Strawberry.
But suppose you can show the IRS that you are truly not able to pay the tax debt you owe. Is it possible to get the agency to stop squeezing the stone trying to get blood in such a case?
The answer is a qualified yes. If you can show the IRS that you lack the current capacity to pay, you may be able eligible for something called non-collectible status.
Naturally there is paperwork involved in doing this. You’ll have to round up various information about your finances, as well as fill out Form 433-F, the Collection Information Statement. An experienced tax lawyer can help you do this and use the information to make the required showing.
If you qualify for currently not-collectible status, you can use that status as a shield against levies and garnishment actions. Please visit our page on stopping collection actions for more information.