The IRS offers taxpayers experiencing severe economic hardship the option of qualifying for the Currently Not Collectible (CNC) status. It’s important to note that this does not mean debt forgiveness. Instead, it’s a temporary status that relieves you from the pressure of the IRS collection process.
We may be able to qualify you for this program if you are facing a situation where you do not have any discretionary income. We may even be able to get you protected on this program, even if you have already received a bank levy notice. Furthermore, we may be able to get your wage garnishment stopped.
Through the Currently Not Collectible status, we can get the IRS to temporarily stop all collections. Call and speak to one of our tax consultants and ask them if you qualify for this program. They will discuss the entire process with you, and often walk you through it on the same day.
What is the Currently Not Collectible Status?
Put simply, the Current Not Collectible status is a label put on taxpayer accounts that the IRS cannot realistically collect from at this time. If you’re struggling financially and can barely pay your bills, let alone worry about your tax debt, then the IRS offers the option of qualifying as CNC to stop any collection efforts.
You will still be asked to pay off your tax debt at a later point, either in full, via installments, or as part of an Offer in Compromise, for example.
What are the Status Qualifications?
We offer a free consultation to see if you qualify for the Currently Not Collectible program. Under most circumstances, you must simply demonstrate that you cannot afford to pay at all. Some key things to note:
1. The IRS calculates your current net income. This is done by deducting any required tax and insurance deductions from your gross pay.
2. The IRS looks at all your current expenses to determine what discretionary income is likely left. This can get a bit tricky because the IRS has maximum expense standards for everything. These standards are adjusted based on how many dependents you claim. They are also adjusted by the county that you live in.
3. The numbers must show that you are unable to afford regular tax debt payments. This is calculated by deducting your allowable expenses from your income. You’re more likely to qualify for an IRS CNC if you’re living off Social Security benefits, welfare, or unemployment benefits.
4. You will have to be up to date on all your tax returns, including those from previous years unless your situation is particularly dire.
Be sure to gather as much financial information as you can to accurately make your case for an IRS CNC status, including bank statements, paystubs, expenses, and debts (loan payments, etc.).
How Long Will IRS Allow You to Stay on Currently Not Collectible?
Typically, the IRS will allow you to stay on this status until certain things change. Potential triggers for a re-evaluation of your Currently Not Collectible status include:
- Failing to pay this year’s taxes/accruing new tax debt (outside of interest and penalties).
- Reaching an annual income level above what the IRS considers your “closing code” (i.e. the income you would need to start making payments).
- Accumulating funds from the sale of assets or property.
Even if no triggering event happens, it is not uncommon for the IRS to re-open the case. Usually, they will ask for updated financial information to see if you still qualify about every 2 years. At that time, you need to show that your financial condition has not improved. If it hasn’t, you will be allowed to stay on this status.
An IRS CNC status does not reduce your total tax debt, and it doesn’t affect the rate at which your debt grows with interest. The IRS is also able to withhold any tax refunds that you would otherwise qualify for and use them to reduce your tax debt, and they may place a federal tax lien on any future assets and properties until your debt is paid.
While tax liens no longer directly affect your credit score, and won’t show up in your credit report, they can affect your ability to seek a loan or credit. But in cases where your more immediate concern is an account levy or wage garnishment, and you have no means of paying the IRS back now, the Currently Not Collectible status can provide much-needed help.
Is the IRS CNC Status Right for Me?
There are drawbacks to consider which might not make CNC the best option for you. If you have the financial means to put some money aside each month, then you may be able to opt for an installment payment plan. This may be preferable to trying to drag your debt out, as it will continue to grow even while your account is designated non-collectible.
Alternatively, you may be able to work with us to negotiate an Offer in Compromise with the IRS, paying a reduced tax debt off over several months, if you’re unable to pay off the entire debt before it expires.
However, for taxpayers facing overwhelming financial odds – particularly during the ongoing crisis – opting for a CNC status may be your best bet towards getting some much-needed breathing room. Our professionals can help determine if this status is right for you.
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