Currently Not Collectable Tax Relief

currently not collectable debt relief can resolve your tax problems.

Your financial situation is different from anyone else. You should take the time to review this tax debt relief options guide to find the best solution for your needs and goals.

What Is Currently Not Collectable (CNC)?

Currently Not Collectible (CNC) is a status assigned to taxpayers whom the IRS has deemed unable to pay their outstanding tax debt. When a taxpayer’s account is designated CNC, the IRS temporarily pauses it’s tax collection process. This means, lifted liens and levies, no wage garnishment, suspending collection efforts, cessation of calls and letters, no further credit reporting and deferred debt payments.

Who Is Eligible?

For a taxpayer to qualify for IRS CNC, you must demonstrate a financial hardship which, after paying for the cost of living expenses, leaves little to no room to pay off an outstanding tax debt. You must demonstrate a severe economic disadvantage and not just a mild inconvenience.

Eligibility Guidelines for CNC

eligibility guidelines for cNC status

To determine your financial hardship, the IRS will evaluate your “total positive income” versus your living expenses. Total positive income includes any positive value shown in the income section on a tax return. The IRS will tally up your income and compare it against both national and local standard living expenses, which are broken up into four categories:

  • Food, Clothing, and Miscellaneous (National)
  • Out-of-Pocket Healthcare Expenses (National)
  • Housing and Utilities (Local)
  • Transportation (Local)

The IRS will combine your standard expenses and deduct them from your total positive income to determine your net disposable income. This disposable income would theoretically be spent on tax payments. If paying off a tax debt after your basic cost of living would create an unfair economic advantage, the IRS might consider your account as non-collectible.

What Happens Under CNC

what happens under cnc status?

Once you receive approval for Currently Not Collectable status, the IRS will stop any tax levy and temporarily suspend all collection and enforcement activity. With your account now in CNC status, the IRS is required to essentially leave you alone. With the exception of your annual tax bill reminder notice, the IRS can no longer make continuous collection attempts. This means:

  • Lifted liens and levies
  • No more wage garnishment
  • Suspended collection actions
  • Cessation of calls and letters
  • No further credit reporting
  • Deferred tax debt payments

However, with your account in CNC status, your debt is not discharged (forgiven). It is still there and you will still be expected to pay off your tax debt once your situation improves. The IRS does not go away. They will later reevaluate your financial standing and ability to pay your tax debt liabilities.

The IRS will monitor your tax returns each year to see if your income has increased. If your income has increased, the IRS will remove your account from CNC status and require you to complete a new financial statement to determine if you can make payments against your tax debt liabilities.

While your account is in Currently Not Collectable, you save money through deferred tax payments and lifted wage garnishments. However, once your account is no longer in CNC status, you will ultimately be paying more in the end, due to accrued interest and tax penalties on whatever outstanding balance.

What Else Should I Know?

The IRS has the right to review your account status for any reason at any time.  Since you owe money to the IRS they have the right to determine if your financial situation has changed.  Denying the IRS a request for a new collection information statement will increase their curiosity and should be avoided.[/vc_row]

Duration of CDC Status

duration of cdc account status

The IRS Currently Not Collectible status isn’t intended as a permanent solution, but only temporary tax debt relief. The amount of time an account stays protected under a CNC status varies on a case by case basis. However your CNC account status will be reviewed periodically since the IRS expects that your financial situation can change in the future.

Due to statute of limitations, the IRS has up to ten years to attempt to collect on your tax debt liabilities. This is based on the date that the taxes are due, not when your CNC account status was approved. A CNC account status does not extend this statute of limitations.

How To Apply For CDC Status

how to apply for cdc account status

The IRS will require you to provide a detailed financial report to be considered for Currently Not Collectible status. However, before applying, you will need to be sure that all tax returns for previous years have been filed, even if you are unable to pay them. This is ensure that your account is in good standing with the IRS.

The information that you will need to prepare in advance of your CNC application include:

  • All income and living expenses.
  • All assets and their market values.
  • Bank statements from the last three months.
  • Proof of any out-of-pocket medical expenses.

You will use this information to fill out IRS Form 433.  This form provides the IRS with a roadmap to your finances that will be used to determine your eligibility for Currently Not Collectible status.

You will need to fill out detailed information, and be prepared to:

  • Make a list of all tangible and intangible assets you have (real estate, cars, stocks, etc.)
  •  Determine a market value for all assets.
  • Track how much income was made in the last three months.
  • Track how much was spent in the past three months.
  • Average your three-month income versus expense analysis, broken down by category.

Thoughts On Currently Not Collectable

Currently Not Collectible tax status puts the IRS at bay.  It and allows you to live your life without IRS intrusions into your bank accounts, wages and property.   When combined with the expiration of the statute of limitations on collection, CNC status it is a legitimate method of tax debt relief for your IRS tax liabilities.

Applying for IRS Currently Not Collectable tax debt relief status is a challenging task.  It is strongly recommended that you have professional advice and representation when dealing with the IRS.

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