I'm on hold waiting to speak to an I.R.S. collection agent about a client. He is on Social Security disability, and in "currently not collectible" status with the IRS, but they are still levying his disability check. Please! $750 per month total income and they think he can afford to lose $115 of that to an old tax debt?

IRS taxes can be discharged in bankruptcy, once they are more than 3 years old, measured from the due date of the tax return, but you must have filed the tax return more than 2 years before you file bankruptcy. And this fellow, well he's been sick a long time and did not file this return.

So his taxes are not cancellable in bankruptcy or we may have just gone that route in dealing with the I.R.S. There are other options in dealing with IRS taxes, such as "installment agreements" or payment plans, and Offers in Compromise, if you can get the IRS to accept one. But being in uncollectible status is very good, because the IRS has "only" 10 years to collect the taxes from you, once they "assess" the taxes, or determine that they are due.

An assessment usually happens within a couple of weeks after you send in your tax return. If you don't send in your tax return, like my client, the I.R.S. eventually gets around to doing a "substitute for return" or SFR return, so that they can have the power to seize your property or wages.

Without an assessment, they can't do anything, so they have to prepare a tax return for you from the information that they have. This is not a good thing for you; always file a tax return. If you owe, they will bill you. Eventually you will go to collection. But if you don't file your taxes, not only is it a crime, but it stops you from having the right to bankrupt the taxes when the time comes.

Well, I talked to the IRS while I've been writing this, and they have cancelled the levy on his SSDI check. Happy days. Thanks for reading my blog. If you have any comments or questions, please feel free to post them below.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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