Each year, millions of Americans owe federal income taxes. Although most taxpayers can pay on time, many find themselves with outstanding tax balances. When these tax debts go unpaid, penalties and interest fees can quickly add up. Continued non-payment only makes matters worse. The IRS will use whatever means possible to collect these debts, including levies, liens, and wage garnishment. Some taxpayers may find relief through payment plans or an Offer in Compromise. For those who are financially unable to make any payment, however, currently not collectible status may be an option.
What is Currently Not Collectible (CNC) Status?
Currently Not Collectible (CNC) status is a tax relief option offered by the IRS to assist those experiencing financial hardship. While in a CNC status, you will be protected from certain IRS collection actions and 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
The IRS will only grant CNC status if it believes paying your tax debt will create a significant hardship. In other words, paying your back taxes would leave you no money for basic necessities. There are several things the IRS will take into consideration when determining your eligibility for CNC status.
- Income – If your only source of income is from Social Security, unemployment, or government assistance, you may qualify. In most cases, your disposable income (income minus necessary living expenses) must be less than $25 per month.
- 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. Keep in mind, however, that your idea of ‘necessary’ expenses may vary greatly from that of the IRS. There are limits to what is allowed.
- Time Left to Collect – Generally, the IRS has 10 years to collect a tax debt (statute of limitations). 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.
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 issue a Notice of Federal Tax Lien.
- While in a CNC status, any tax refunds will be offset to pay down your balance.
- Penalties and interest will continue to accrue, increasing your outstanding balance.
- Although CNC status can provide temporary relief from IRS collections, it will not reduce or remove your tax debt unless the statute of limitations runs out.
If you owe the IRS and can’t pay, don’t ignore the problem. See if you qualify for Currently Not Collectible status or other tax relief programs. Call Tax Defense Network at 855-476-6920 for a free consultation today!