Accepted Answer

Hello Kris,

If you do not have the means to pay the taxes owed, have little assets that the IRS can levy, no income above the minimum need to cover necessary living expense, you would most likely be able to be considered "uncollectible" to the IRS. Being considered "uncollectible" to the IRS means that they can temporarily pause collections against you under the IRS hardship rule.

If you qualify for this, you still owe the IRS money and interest will continue to accrue, however all collection activities must be temporarily suspended against you. The IRS will then continue to monitor your financial situation to see if it improves to a point where they can demand payment. This review happens normally once a year. You will be required to send an updated financial statement every year for them the IRS to review. These statements must be accurate because they will compare it to filed tax returns to make sure everything matches.

In order to receive an uncollectible status from the IRS you must be able to prove that you do not have any assets that would allow you to pay the tax amounts owed. So in essence, you must show you only have enough money to pay for the basic necessities of life. To do this, you must fill out IRS Form 433-F. This is the form used to show all your assets, this is required with most IRS filings because it will give them a sense of the assets you own that they can liquidate in order to fulfil your tax liability. However, the purpose of doing this when filling it out to receive an uncollectible status is to show that you do not have any assets of value that they can liquidate and it would not be worth their time and effort to collect from you.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you Kris.




Edited by Merlo on 9/11/2009 at 3:12 PM

Expert:	Merlo
Pos. Feedback:	99.8 %
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Answered:	9/11/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad