If you have a tax debt and are unable to afford an Installment Agreement or other payment plan, you may qualify for a financial hardship plan. Some examples would include a Partial Pay Installment Agreement or “Currently Not Collectible” status.
A Partial Pay Installment Agreement allows a taxpayer to pay less than the full amount of their tax debt. Generally, if you cannot afford payments under the Fresh Start program or the 84 Month Pilot Program, you may qualify for a partial pay installment agreement. However, you may be subject to thorough financial review. You would undergo a financial review when you initially apply for the Partial Pay Installment Agreement but would also be reviewed periodically to determine if you’ve had a change in circumstances that would allow you to pay more. The IRS can increase your payments if you have an increase in income.
In a Partial Pay Installment Agreement, you generally pay less than the full amount of your tax debt, but still pay something toward your debt. A Partial Pay Installment Agreement can sometimes be used in cases in which you do not qualify for an Offer in Compromise.
While a Partial Pay Installment Agreement can be used when you cannot afford to pay your entire tax debt, what can you do if you cannot afford to pay any of your tax debt? In that case, you may qualify for “Currently Not Collectible” status. In such a case, all collection activity by the IRS is stopped. To qualify, you must meet certain financial eligibility requirements set by the IRS. Currently Not Collectible status does not permanently eliminate your tax debt. Rather, it simply establishes that the IRS cannot practically get any money from you. As a result, the IRS stops collection activity.
While you are in Currently Not Collectible status, the statute of limitations for the IRS to collect its past-due tax debt continues to run. In other words, you are running out the clock on the IRS’s time to collect the debt. If the debt remains uncollectible until the statute of limitations expires, the IRS cannot ever collect the tax debt.
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