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Deemed Uncollectible


Sometimes a taxpayer is unable to make any payments to the IRS because of the loss of a job or other reason. Sometimes a taxpayer is unable to pay because of old age or poor health. When faced with such a situation, the IRS is forced to decide whether to expend additional resources to collect the liability or decide whether to deem a taxpayer’s account as temporarily uncollectible. Being deemed temporarily uncollectible is an additional option that may be available to a taxpayer to resolve his or her tax problems.

The IRS may deem a taxpayer’s account as temporarily uncollectible for one or more of the following reasons: hardship, bankruptcy, no assets, no job, illness, old age or an inability to pay. If a determination is made that a taxpayer is uncollectible, the taxpayer’s account is removed from active IRS collections. However, although a taxpayer’s account may have been removed from collections, the IRS is not legally barred from attempting to collect a taxpayer’s tax liability in the future provided that the collection statute of limitation is still open. Furthermore, penalties and interest will continue to accrue on the unpaid liability.

While this option may be available to a taxpayer to temporarily resolve his or her tax liabilities, it is often difficult for a taxpayer to learn whether the IRS has deemed them as uncollectible because, as a policy, the IRS does not generally disclose that a taxpayer has been deemed uncollectible. This IRS policy is designed to encourage a taxpayer to continue to make an effort to address his or her tax liability. Nevertheless, Patrick T. Sheehan & Associates has the ability to determine a taxpayer’s status within the IRS. Patrick T. Sheehan & Associates can determine if being deemed uncollectible is an appropriate option for you.

Taxpayer Doesn’t Make Enough Money to Pay IRS DebtIn this situation, our taxpayer was a real estate salesperson whose income had dropped substantially because of the downturn in the economy. Because the IRS believed that the economy will improve and that our taxpayer will be able to pay his liability in the future, they were unwilling to consider an Offer in Compromise. However, our taxpayer cannot make any payments under an installment agreement because he simply does not make enough money. In this case, we were able to negotiate a status of deemed temporarily uncollectible for our taxpayer. As a result, the IRS agreed to leave our taxpayer alone until he gets back on his feet. The liability still exists, but the IRS will not take any enforced collection action against our taxpayer. Under deemed uncollectible status, the taxpayer must still file all of his tax returns on time and must pay all of his liability in full going forward. Further, the IRS will keep all refunds due to the taxpayer. Our taxpayer now has enough time to concentrate on improving his business and to get back on his feet. Case Study

Patrick T. Sheehan & Associates has successfully represented taxpayers in determining their collection potential and whether being deemed uncollectible is a viable option. Our firm possesses both the skills and experience necessary for success when dealing with the IRS regarding this option for resolving a taxpayer’s tax liabilities.

Please call Patrick T. Sheehan & Associates, Attorneys at Law, P.C. at 877-447-7529 to schedule an appointment or to obtain additional information. Call Us Before the IRS Calls You!®

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Chicago Area Tax Attorneys

Chicago Area Tax Attorneys

314 North York Road
Elmhurst, IL 60126

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1-877-447-7529

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