In this blog, we’re going to talk about one of the options the IRS offers for tax debt relief: Currently Not Collectible status.
If you owe the IRS tax debt, but are currently not able to pay them anything due to your financial situation – you might be a good candidate for Currently Not Collectible (CNC) status.
What is Currently Not Collectible status?
Currently Not Collectible (CNC) is when the IRS determines that you are financially unable to pay the tax debt that you owe, so they put your debt on hold. This does not mean that the debt goes away – it simply means that the IRS will delay taking any additional collection action against you until they have determined that you are able to pay.
How do I qualify for CNC status?
You will need to show the IRS that you are not able to make payments by filling out a Collection Information Statement,
Form 433. This form gives the IRS a snapshot of your current financial picture. You will be asked to share information about your income, investments, the cash you have in your bank account and at home, information about property or digital assets you may possess, etc. You will also be required to submit documentation to support the claims made on this form, such as bank statements, current pay stubs, profit and loss statements if you’re self-employed, and other documentation showing that you don't have equity in assets that you can tap into to help make these payments. Essentially, they are looking to determine if you are able to afford basic living expenses and pay your tax debt at the same time. If they determine that paying the debt would cause financial hardship for you, they will put your account in Currently Not Collectible status and suspend further collection action.
What if the IRS approves my CNC request?
If the IRS approves your not collectible status, this will typically delay further debt collection action for about a year. Applicable penalties and interest will continue to accrue while you are in currently not collectible status. Additionally, the IRS may apply any future refunds to the outstanding tax liability. The IRS will send you an annual letter that explains the current balance due on your account. This annual letter is not intended to be a bill but a reminder of the balance due.
While you are in currently not collectible status, the IRS will conduct periodic reviews of your financial picture to see if your status has changed and determine if you are able to make payments.
Sometimes the IRS may request that you submit an updated Form 433. Something else to keep in mind is that, if the IRS does approve your request, they will file a federal tax lien against your assets (or your business assets, when applicable). This will prevent you from selling any of these assets that could go toward paying off the tax debt.
What if the IRS denies my CNC request?
Generally, if the IRS denies your Currently Not Collectible status request, you have the right to appeal by filing a request for a Collection Due Process (CDP) hearing. (Keep in mind that the IRS will only grant a CDP hearing if it is filed timely – meaning that you requested a hearing by the date listed on the notice.) In this hearing, you can request Currently Not Collectible status. If they still disallow your request after the CDP hearing, you then have the option to appeal that decision to the United States Tax Court. However, if you don’t want to go through the appeal process alone – we've got you. Keep reading to see how we can help!
What if I don’t want to face the IRS alone?
We’re so glad you asked! It is possible that you don’t know where to start or maybe you are afraid of dealing with the IRS on your own – and we understand this fear. Whenever you are dealing with the IRS, we always recommend hiring an experienced tax professional who can review your situation and provide guidance on possible next steps so that you do not get yourself into more of a pickle than you already are.
That’s where our Tax Debt Relief team comes in. The tax professionals at our company have been working with taxpayers across the country since 1988 to help them resolve their tax debt. Whatever situation you are facing, we have seen it all and we are standing by ready to help. If you are hesitant to commit to any one company, we understand that, too – that is why we offer a free, no obligation consultation where you can chat with one of the tax professionals on our team and see if our Tax Debt Relief service would be right for you. At our company, we don’t have salespeople, and no one gets a commission – we are truly just in the business of helping guide taxpayers to resolving any tricky tax situations they might be facing.
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