Currently Not Collectible is the IRS's decision to conclude that a taxpayer cannot afford their federal income taxes without significant hardship. This status protects taxpayers against aggressive collection actions by the Internal Revenue Service.
Simply put, if the IRS receives proof that the taxpayer is unable to pay the tax debt and an account is listed as currently non-collectible, the IRS will stop trying to collect back taxes. Although it does not remove any tax debt owed by the IRS or attempt to settle it, CNC status is an important option for taxpayers who cannot afford to pay the back taxes they owe when filing their income tax return.
The IRS ceases all collection activities including issuing garnishment and levy orders once a taxpayer has been declared CNC, but they will apply your tax refunds toward your tax debt. The IRS sends a taxpayer an annual statement outlining the tax owed. The annual statement is not considered to be a bill.
When facing economic hardship, you can apply to be listed as currently not-collectible by consulting a tax attorney or by contacting the IRS directly using Form 433F, Collection Information Statement. You should ask the IRS for an updated tax balance, which will include interest and penalties.
The IRS will first look at any nest egg you might have, such as a savings account to pay your taxes. The IRS will ask you to show proof of your total positive income and expenses if you don't have assets to pay off the debt. The IRS wants to know if you can make tax payments toward the debt with installment agreements.
To meet CNC eligibility requirements, the following financial information and bank statements are required:
Note: If you're married, you must submit the above information for both spouses. This proof of taxpayer's income is only applicable to Social Security benefits, retirement income, pensions, child support, and/or the TANF.
If you owe taxes and cannot pay monthly payments, you are eligible to apply for CNC status. Listed below are some reasons why accounts are in uncollectible status:
For balances under $10,000: Verification of a financial report is not necessary if the taxpayer meets certain conditions such as terminal illness, imprisonment, or only having Social Security/welfare as income.
For balances over $100,000: Additional verification is required including individual credit reports, motor vehicle records, and courthouse records checks.
The main disadvantage of the IRS CNC status is that it is not a permanent solution and usually only lasts from six months to two years. You may be removed from CNC status without warning.
Additionally, even while an account has a CNC status, penalties and interest will continue to accrue, and the IRS will revive the case in collections. The debt will be much higher.
The IRS will monitor your financial status and review reports from other parties, such as banks and employers. If the IRS finds that your total positive income has increased significantly, you will be removed from your current, not collectible status.
Important: The IRS demands that all future taxes be filed and paid on time to avoid being removed from uncollectible status. If you're self-employed and have had difficulty saving money for taxes in the past, this will make it impossible to remain uncollectible.
Ideal Tax is a tax settlement service that can help you find the most appropriate form of tax relief based on your financial condition. Whether your financial situation and tax issue would be best resolved with a partial payment installment agreement, offer in compromise, or uncollectible status, Ideal Tax can analyze your collection information statement detailing your financial information and offer further instructions to approach your IRS debt.
With years of experience dealing with the IRS, tax professionals at Ideal Tax will provide excellent representation and personal attention as they help you navigate your IRS debt and help you resolve your tax problems. Ideal Tax's tax attorneys are skilled negotiators with a deep understanding of tax laws and IRS manuals. We will maximize your chances of being placed in non-collectible status.
Don't navigate the complex CNC application process alone. Our experienced team can help you prepare the necessary documentation, present your case effectively to the IRS, and maximize your chances of obtaining Currently Non-Collectible status.
If you're experiencing financial hardship and cannot afford to pay your tax debt, Currently Non-Collectible status may provide the temporary relief you need. Our experts will evaluate your situation and help you pursue the best resolution for your circumstances.
Check Your CNC Eligibility Today