Delaying Collection

If the IRS determines that a taxpayer is unable to pay his, her, or its outstanding tax liabilities, it may delay collection until the taxpayer’s financial condition improves. Depending on a taxpayer’s particular situation, there are two primary means to have the IRS delay taking enforced collection against a taxpayer.

1. Temporary Collection Hold

   Obtaining a temporary collection hold is one way to delay the IRS’s enforced collection efforts.  There are many situations in which this may be desirable or necessary, such as when a taxpayer files an amended return or an audit reconsideration that decreases the amount the taxpayer owes.  It is not uncommon for the IRS to take 90 days or more to process amended returns and audit reconsideration requests.  In such a situation, the IRS may be willing to provide a temporary hold to allow for the processing of the amended tax return or audit reconsideration.  Otherwise, the taxpayer would have to deal with enforced collection for the original, incorrect amount owed to the IRS.
   There is no prescribed time period for temporary collection holds, although they frequently range from 14 days to one month.  If more than one month is needed, it may be possible to obtain successive collection holds.

2. Currently Not Collectible Status

   If a taxpayer is unable to pay his or her tax debt because payment would prevent the taxpayer from meeting basic living expenses and would cause undue financial hardship, the IRS has the option to delay collection until the taxpayer’s financial condition improves.  In such a situation, the IRS puts the taxpayer’s account in “currently not collectible” (“CNC”) status because the IRS considers the taxpayer to be “uncollectible.”
   Currently not collectible status allows taxpayers to avoid collection action, such as levies or garnishments, from the IRS by taking the taxpayer’s outstanding account and “shelving it,” or taking it out of the IRS’s active collection inventory.  While a taxpayer’s account is in CNC status, the taxpayer does not have to pay anything against the “shelved” tax liabilities (although the taxpayer does have to make payments toward current tax liabilities because they are not included in the taxpayer’s CNC status).
   A taxpayer desiring to have his or her account placed in currently not collectible status will typically be required to submit a detailed financial statement, known as a

   Collection Information Statement

   , to the IRS along with proof of the taxpayer’s financial status and current inability to pay.
   CNC status is typically a temporary measure, as a taxpayer’s financial situation will be periodically reevaluated by the IRS to determine if there are any changes to the taxpayer’s financial situation that result in the taxpayer being able to fully pay or make payments toward his or her outstanding tax liabilities.

Not all taxpayer qualify for temporary collection holds or currently not collectible status, or, even if a taxpayer does qualify, there may be better and more effective options available to a taxpayer in resolving his tax liabilities.

If you are facing IRS collection, contact a tax attorney at the Politte Law Offices today, to determine what options are available to you, and what the best option is, which of based on your unique situation.