Can You Defer Payments From An Installment Agreement?

Each year, millions of taxpayers file a tax return with a balance due. Most people are able to set up a cheap monthly payment with the IRS, known as an Installment Agreement. The rest of the taxpayers just simply cannot afford to pay the tax debt back. If you have a past-due tax debt with the IRS and are unable to make payments towards the balance owed, then you may be entitled to defer those payments.

To qualify for a deferral of payments, you must show that you have little to no money left over each month. This is defined by matching your monthly income against your monthly expenses.

Currently Non Collectible

You must be able to prove you are in a financial hardship and then you can request that your account be placed into a “currently non collectible” status. Your account will remain in this status until your financial ability to pay improves.The overall concept of being placed into currently non collectible is to show the IRS that you have no money left over each month and if you were to dispose of any assets this would impose a severe financial hardship.

Currently Non Collectible

Why You Must Disclose All Of Your Income?

Prior to taking your income and expenses into concern, the IRS will search for any bank accounts that you may have. They are looking for accounts with large totals to pay off the tax debt. The way the IRS defines if the funds are usable, is through your financial status.

When telling your financial information, you must include all income that is received monthly. This will include any

  • Wages
  • Pension
  • Self-employment
  • Social security

  • Dividends
  • Other earned
  • Unearned income

that is received. All income must be stated, and proper federal tax withholdings must be made. Proper withholding will show the IRS that you are making strides to stop the cycle of owing each year.The IRS will allow you to claim all basic living expenses for your household. These expenses include, but are not limited to, utilities, food, rent or mortgage, car payments, car insurance, health insurance and out of pocket medical costs.

Do You Have An Equal Investment Account?

You must not have equity in investment accounts, real estate, vehicles or whole life insurance policies that you can borrow against to pay the tax liability in full. If you do have any assets with value, the IRS will request that you attempt to borrow against the value of the asset to pay them back for the taxes owed. If you apply for a loan to borrow the money against the asset and are denied, then the IRS will proceed with the request of placing your account into currently not collectible. There is a catch to this request, the IRS can set limits on your expenses. This means that if you have a car payment of $950.00 a month, the IRS may only allow you to claim $508.00, based on National Standards for your area.

Currently Non Collectible

There are national standard limits for food and clothing, housing and utilities, transportation and medical costs. Each national standard is based on national and local standard living expenses for your area. For an expense to be allowed above the amount listed on the National Standards guide, you may have to provide records. Most of the time you can fax over the records needed while on the line with an IRS agent. If done directly over the phone, then you will more than likely get an instant preliminary decision. Upon submission of your financials, the IRS will place your account into “Currently non-Collectible” after manager consent of the data given.

What Is The Status Of Collection Actions?

 Once placed into this status, the IRS will hold off on collecting the past due taxes from you. You will no longer be subject to their usual collection actions. They will halt garnishing your wages and levying your bank accounts. This means that the harassing letters and scary phone calls will stop also.Once the IRS agrees that your account should be placed into currently non collectible, they will leave you alone with one exception.

Currently Non Collectible

Will I Still Receive an Annual Notice?

You will still receive an annual notice from the IRS stating your balance due because this is a requirement by law, but you are not required to make payments. Most people think that the IRS will forget about the tax due if you are ignoring the notices. Where it is true that you can be placed into a currently non collectible status based on the fact that the IRS is unable to locate you, this will not keep you safe from bank and wage levies as well as federal tax liens.

Although it seems like you are saving money by lifting a wage garnishment or bank levy by being placed into this Currently non Collectible status, you will ultimately be paying more in the end because of the added interest and penalties on the remaining balance due. It is best to consult a trained expert in helping you to determine your financial status and how to resolve your tax debt with the IRS that best suits your needs.

What Does Non Collectible Status Mean?

So, being placed into a deferral status sounds like a good deal especially if you have already been struggling to make ends meet within your home, right? Achieving a Currently non-Collectible status can allow you to change your expenses and learn how to manage your finances better without the worry of the collection action against you. However, being placed into this status does have a few downfalls. Once placed into currently non-collectible, the debt does not go away. The IRS deems that you can not afford to pay your taxes at this time or be collected upon through equity in your assets.
Currently Non Collectible

You will still owe the past due tax amount and the balances will continue to accrue interest and penalties at a daily rate. The IRS will keep any tax refunds you may be entitled to in the future years and apply them to your past due tax debt. This is a process called “Refund Offset”

Currently Non Collectible
Federal Tax Lien

What Is The Refund Offset?

Refund offset of any future payouts will occur until the tax debt is paid in full. Also, the IRS will file a Notice of Federal Tax Lien. Liens are typically filed for each year that a balance is present. There can be many liens filed or the IRS can file one lien with multiple years grouped in. These liens will be filed against your property or other assets you may have and will be visible to creditors. Once a lien is on your credit report it will make it hard for you to obtain any type of loan funding or sell private assets.

A value to being placed into the Currently non-Collectible status is that you can do so even if you have missing tax returns. Under normal rules, the IRS will not even entertain a resolution with you if there are missing tax returns on your account. With the value of proving that your account should be placed into the currently non collectible status, it can be applied with or without the missing returns.

For example, If you’re in a current financial hardship and cannot afford to get the tax returns prepared or have an active levy on your wages, this status will stop that levy and allow you the chance to free up some funds and afford to pay a tax professional to bring your account compliant with filing.

You Can Do A Few Things

If Your Income Increases

In the case where you report increased income on a future tax return while in the currently non collectible status, this may flag the IRS to review your file. The IRS will either contact you by mail or by telephone. Make sure when you file your tax returns that it includes your most recent address and updated phone number. You may be asked to submit revised figures to once again show that your ability to pay has not changed. Keep in mind that a financial hardship must be shown and that it must confirm that by making a payment towards your tax debt it will create more than just a mere inconvenience on your finances.
Currently Non Collectible

You must provide all updated income and expense information to show that you still qualify for the currently non collectible status. You will be asked to report all info on a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed individuals.

Currently Non Collectible

How You’ll Make Monthly Payments

This form will have places for you to report

  • Vehicles
  • Life insurance policies
  • Credit card limits

  • Investments
  • Real Estate 
  • Bank Accounts

And all income and expenses for your household on a monthly basis. Aside from what is supplied, the IRS will monitor the income on your tax returns or data reported such as W-2’s, 1099’s, etc. If the IRS decides that your financial statements are showing an ability to pay, they will remove your account out of the currently non collectible status and request the dollar amount available after all expenses are paid as monthly payments through an Installment Agreement.

What Is Statute Of Limitations

The IRS has a “statute of limitations” period in which they can actively attempt to collect the tax debt from you. Within the time that the IRS allots to collect the balance you owe, they may review your income annually to see if it has gotten better. That period is generally up to 10 years from the date that the tax is assessed. There are some situations where the 10-year period to collect can be suspended. If you file an Offer in Compromise and after two years of pending review it gets denied, your collection time period will be extended by two years.
Currently Non Collectible

This is a result of the time limit being suspended while your Offer in Compromise request was under review. Another common reason for your collection time to be stretched is because youleave the country for six months or more. The time the suspension is in effect will extend the time that the IRS has to collect the tax debt. This time can vary based on each individual situation.

Currently Non Collectible

What Is The Collection Process

If within the 10-year period the IRS is not able to collect the tax, they can no longer attempt to garnish your wages or levy your bank. They cannot send you notices and expect for a payment to be made if the time limit has expired. For Example, A taxpayer is assessed a tax balance for 2012 that has a collection expiration date of 2022. If the IRS confirms that you do not have the ability to pay for the debt related to the tax liabilities and places your account into currently non collectible status in the tax year 2020, you will only have a time period of two years left before the debt is expired and “written off”.

Once the time limit has expired the tax debt balance will be completely removed from your account. Once a balance is written off you will then have to take additional steps to remove the lien from your assets. Depending on how the IRS filed the liens will decide the complexity of removing it.

Currently Non Collectible
Do You Have This Situation?

We Have a Long-Lasting Solution

The currently non collectible status is not meant to be a long-lasting solution, but only one of a temporary relief. The exact amount of time that your account can remain in this status is all based on case by case situations. When the IRS manager decides that your account is placed into currently non collectible, they will input a code in their system. This code is what will pull your account for review. The closing code is based upon a numerical figure that your income cannot exceed.

Omni Tax Help

Once a tax return is filed showing your income has reached this limit, a notice will be sent letting you know that it is time to review your financials again.If you have a leftover amount of money each month but still do not have any equity or assets, you may want to consider an Offer in Compromise settlement. This type of resolution will allow you to settle the tax debt for a portion of what you owe. All of the settlement programs can be determined with the same financial information needed to place your account into currently non collectible.

Contact Us