Gaining Time to Pay Tax Debt

Last updated on October 31, 2023

Individuals that owe back taxes can gain time from the IRS to pay back their liability if they fulfill certain criteria. The first requirement is that the taxpayer’s present financial situation must not allow him or her to pay any amount in tax debt. The taxpayer’s income from all sources must only be sufficient to meet basic living needs such as housing, food, transportation, etc. The second condition is that the taxpayer must not own any asset, property or right to a property that can be sold to satisfy the tax debt. When collecting tax debt the IRS uses a levy as their final collection action.

If the IRS finds that they cannot collect back taxes from the individual either through a levy or through a resolution plan, then they will classify the case as Currently Not Collectible (CNC). This means that the IRS will not make any collection efforts until there is an improvement in the taxpayer’s financial situation. Until that time, the taxpayer is not required to pay any amount of his or her liability.

Using this method, individuals that cannot pay their back taxes can protect themselves from IRS collection actions. If the taxpayer’s financial condition remains the same after ten years from the time they owe back taxes, called the statute of limitations, then the entire amount of tax debt is forgiven and the case closed.