Uncollectible Accounts

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What is an uncollectible account?

Uncollectible Accounts

DebtHelp.com Tip: Even though not technically known as an Offer in Compromise, you may have your unpaid tax bill classified as an “uncollectible” account. Arriving at this decision involves the IRS compromising its tax debt with you.

Technically defined, an “uncollectible” tax account is also known as an ‘undue hardship' case. In order to qualify for this classification, you must have very little – if any- assets subject to a tax levy. You also must have no income beyond that needed to cover your living expenses.

Steps involved in obtaining the “uncollectible” tax status are as follows:

  • You notify the IRS you are unable to pay your unpaid tax bill. You explain why.
  • The IRS reviewer will prepare a Form 53. This form will temporarily inactivate any collection activities against you.
  • Interest and any taxes will still be owing.
  • The IRS will periodically re-evaluate your financial status. This usually occurs yearly.
  • When the IRS requests it, you will need to complete a new Financial Statement (Form 433A)
Having your unpaid tax bill classified as an “uncollectible account” is a good way to reduce IRS debt. It is not an easy process, though. Plus, the IRS will gain insight into a lot of your personal financial information.



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