Uncollectable Status

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IRS will write off (“53”) an unpaid tax liability as currently uncollectable if the taxpayer can demonstrate that he is unable to make even modest payments at this time. This is also a formalized procedure that requires the submission of completed IRS form 433A, in the case of individuals, or 433B in the case of businesses. This write-off does not mean that the debt is forgiven; it only means that the IRS will make no effort, for the time being, to attempt to actively collect the debt. The IRS can revive the case periodically to see if the taxpayer's financial condition has changed. As a matter of practice, the case usually remains in this inactive “53” status until something activates it, such as additional new liabilities of the taxpayer. Also these cases are automatically activated at least one year prior to the expiration of the collection statute.

It should be noted that interest and penalties accrue on the unpaid balance even though the case is not being actively worked by the IRS. Also the RRA of 1998 now requires the IRS to send out reminder notices at least once a year on inactive cases.

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