When You Just Can't Pay IRS- Code 53

    Some IRS collection officers are part time magicians. With the wave of a ball point pen it is possible for a taxpayer’s tax debt to be placed in a category called “Currently Uncollectible”. The inside jargon for this designation is called “Code 53”. This code is placed on a taxpayer’s tax transcript and suspends IRS enforced collection action. Now here comes the magic: the IRS collection statute continues to run. The normal tax statute for tax collection is 10 years from the date a tax is assessed. Note this is not the date a tax return is due or filed but rather the date the IRS assesses the tax. Therefore, it is possible that a taxpayer will never pay a tax debt if the Code 53 status continues for the duration of the collection statute of limitations. When placed, parameters are usually set to tickle the IRS collection system if the taxpayer's income rises sufficiently to entertain payment of the tax debt. Now the bad news. IRS inspectors have determined that many IRS collection agents dealing with smaller tax debts have been writing off these debts without adequate research to determine if a taxpayer owns real or personal property from which tax payment can be made. What this means for all tax cases is that IRS will begin using this code 53 designation sparingly in the future thus making it more difficult to resolve tax cases of this nature.