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Action Plan: How to Resolve Currently Not Collectible Hardship in Alabama
Facing currently not collectible hardship from the Alabama Department of Revenue can be overwhelming, but the administrative tax code provides clear pathways to secure relief. Whether you seek a monthly payment plan, an offer in compromise, or temporary hardship relief, this step-by-step framework outlines how to stabilize your account.
Phase 1: Halt Enforced Collections
1. Request a Collection Stay: Reach out to the ADOR collections division before the 30-day deadline passes. Request a temporary hold on bank levies and wage garnishments.2. Delinquent Tax Resolution: Immediately file any unfiled tax returns from past years. File compliance is mandatory before ADOR will evaluate any resolution.
Phase 2: Compile Financial Evidence
1. Asset Analysis: List all assets and determine their net equity.2. Living Expense Alignment: Document your rent, utilities, and grocery costs. Align these with the localized allowance standards for Alabama.
3. Justify Special Circumstances: Gather medical records or employment notices to justify any costs that exceed local allowances.
Phase 3: Submit Formal Relief Applications
1. Structured Installment Plan: Submit Form IA-1 to establish a monthly payment plan that matches your monthly budget.2. Hardship Relief: If paying the tax debt prevents you from affording basic living necessities, request a temporary Currently Not Collectible status.
3. Offer in Compromise: If your financial profile indicates you can never pay the debt before the 6-year collection statute expires under Ala. Code § 40-1-30, submit a settlement package.
Phase 4: Finalize and Maintain Your Agreement
1. Respond Immediately to Requests: Send any requested financial records to the ADOR examiner to avoid rejection.2. Review the Release Order: Verify that a formal release has been processed to your bank or employer.
3. Stay in Compliance: Never miss a future filing or payment deadline, as doing so will instantly void the agreement and expose you to renewed collections.
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Case Files: Resolving Currently Not Collectible Hardship in Alabama
These detailed case files demonstrate the practical application of Alabama collection guidelines and show how taxpayers can protect their assets from active ADOR enforcement.
Case Study A: Stopping a Wage Garnishment Under Alabama Law
An hourly employee in Alabama had their wages garnished by the Alabama Department of Revenue under Ala. Code § 6-10-7 to collect a tax debt of $43,363. The garnishment was stripping 25% of their disposable pay from every check, leaving them unable to afford basic transportation to work.Their representative quickly contacted the collections unit, submitted Form IA-1, and proposed an installment plan of $678/month. Because a formalized payment plan was established and full filing compliance was achieved, ADOR issued a formal wage release order to the employer, restoring the worker's full paycheck within one pay cycle.
Case Study B: Subordinating a State Tax Lien for Home Refinancing
A homeowner in Alabama was prevented from refinancing their mortgage due to a state tax lien filed by the ADOR for $43,363 in unpaid income taxes. The lender refused to approve the new loan unless the tax lien was cleared.The homeowner's representative prepared an administrative request for lien subordination, showing that refinancing would allow the homeowner to pull out cash equity to pay off $10,841 of the tax debt immediately. Recognizing that this would maximize collection potential, the agency approved the subordination, allowing the loan to close and the tax liability to be significantly reduced.
Frequently Asked Questions
How long does Currently Not Collectible status last in Alabama?
CNC status is temporary. Alabama Department of Revenue typically reviews hardship cases annually or biennially. If your income reported on future Alabama tax returns indicates improvement, ADOR will revoke the status and demand an installment agreement.
Will ADOR file a tax lien if I am in CNC status?
Yes, Alabama Department of Revenue often files a Notice of State Tax Lien even if you are granted hardship status to protect their interest for the duration of the 6-year collection period under Ala. Code § 40-1-30.
Does the collection statute of limitations continue to run during CNC?
Generally, yes. Being in Currently Not Collectible status does not pause the 6-year collection statute clock under Ala. Code § 40-1-30 for Alabama Department of Revenue, meaning the debt could eventually expire while you are in hardship.
Can I still get a tax refund if I am in hardship status?
No. Alabama Department of Revenue will automatically intercept any future Alabama tax refunds and apply them to your outstanding tax debt, even if your account is currently coded as Not Collectible due to hardship.
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