What is Currently Not Collectible?

Owing back taxes is scary for many taxpayers. In our experience most people don’t set out to defraud the government. Most of the time it’s an honest mistake or something happened beyond the taxpayer’s control. Unfortunate things happen. CNC status is a great program…let’s see if you qualify!

When these tax debts go unpaid, penalties and interest fees can quickly add up. Avoiding the letters and procrastinating only makes matters worse. The IRS will use whatever means possible to collect these debts, including levies, liens, and wage garnishments. There are payment plans or an Offer in Compromise that can provide relief. Getting accepted for an Offer in Compromise is great but what if you can’t afford the payment? Currently not collectible status may be an option.

What is Currently Not Collectible (CNC) Status?

Currently Not Collectible (CNC) status is a tax strategy offered by the IRS specifically for those experiencing financial hardship. While in a CNC status, you will not have to worry about the IRS coming after you anymore. No payments will be required until your financial situation improves. If the statute of limitations for collections expires (typically 10 years) while you’re in a CNC status, the IRS will forgive your tax debt. Qualifying for this type of tax relief, however, is not as easy as simply saying you don’t have the money to make payments.

Currently Not Collectible Requirements

In order to qualify for this program you must prove to the IRS that paying the debt would create a financial hardship. Would paying the debt prevent you from paying your bills? Would paying your back taxes leave you with no money for basic necessities. There are several things the IRS will take into consideration when determining your eligibility for CNC status.

· Income – If you are on a fixed income such as Social Security, unemployment, or government assistance, you probably qualify. In most cases, your disposable income must be minimal. If you find yourself robbing Peter to pay Paul then you may very well qualify.

· Assets – The IRS will look at savings accounts, investments, and other assets that could be sold to pay off your tax debt.

· Necessary Living Expenses – If your income is just enough to cover living expenses, the IRS may grant CNC status. There are limits to what is allowed. Your idea of necessary and the IRS’ idea of necessary probably aren’t the same.

· Time Left to Collect – In general, the IRS has 10 years to collect a tax debt (Collections Statute Expiration Date). If they don’t feel there’s enough time to collect or that your financial situation will not improve before the clock runs out, the IRS may grant CNC status.

The IRS may also take into consideration other things that could cause financial stress and prevent you from making payments. To determine if you’re a good candidate for Currently Not Collectible status, we strongly encourage you to speak with a tax professional.

How to Apply For Currently Not Collectible Status

To request CNC status, you can contact the IRS or work with a tax professional. If you prefer to do it on your own, call the IRS at the number listed on your most recent tax notice or the main helpline, 1-800-829-1040. The representative will explain the process and what information you’ll need to provide to prove your financial hardship. It’s also helpful to complete IRS Form 433-F, Collection Information Statement or IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, before speaking with the IRS as this will expedite the process.

The IRS determines eligibility for CNC status on a case-by-case basis. Depending on your specific circumstances, it may take several weeks or months to approve. If your request is denied, you may appeal the decision. Appeals however are granted very rarely so it is extremely important to get it right the first time. This is another reason it’s important to consult with a Tax Professional before contacting the IRS on your own. Presenting your situation in a way that is beneficial to you is key to getting approved for this program.

Important Things To Remember About CNC

Currently Not Collectible status can help you get back on your feet and keep the IRS from levying your bank accounts or garnishing your wages. It’s important to note, however, that CNC status may be temporary. If your financial situation improves, the IRS will expect payment. Here are a few other things to keep in mind:

· If you owe more than $10,000, the IRS will probably issue a Notice of Federal Tax Lien. (see our website for more information about Tax Liens)

· While in a CNC status, any tax refunds will be offset to pay down your balance.

· Although CNC status can provide temporary relief from IRS collections, it will not reduce or remove your tax debt until the statute of limitations runs out. If you anticipate that your financial situation will not improve in a significant way then you can wait out the statute of limitations and wait for the debt to fall off.

If you owe the IRS and can’t pay, ignoring the problem will only make it worse. There are options for every situation. The Tax experts at Lifeline Tax Solutions can help you through this difficult time!

See if you qualify for Currently Non Collectible status or other tax relief programs. Call 800-767-1019 for a free consultation today!