How Do I Know if I Qualify For Currently Not Collectible Status?
In order to grant Currently Not Collectible (CNC) status, the IRS must make a determination, based on a taxpayer’s financial position, that they are unable to make payments toward past due debt for the next 24 months. The CNC status expires when the IRS notifies the taxpayer that the agreement has ended.
How Boxelder Can Utilize Currently Not Collectible Status
Jennifer was completely overwhelmed by her tax debt. In addition to owing money to the IRS, she owed thousands of dollars in credit card debt, had two dependent children to take care of, and had just been laid off from her job. The good news was that she had good prospects for a well-paying job, but she unfortunately did not expect to be formally hired for another six months.
Jennifer met with a Boxelder Consulting licensed tax professional, who reviewed her case and decided to enroll her in a temporary relief status known as Currently Not Collectible (CNC). This put a hold on all of Jennifer’s past due payments to the IRS for 24 months. Given this opportunity to temporarily catch her breath, Jennifer managed to get back on her feet, pay off her other debt, and acquire a new lease on her financial health moving forward.
CNC Status – Rules and Requirements
- A taxpayer may qualify for Currently Not Collectible status if
- Their tax filings are up-to-date through the current tax year;
- Their estimated tax payments are up to date through the current tax year;
- They fill out a financial disclosure form (433-A or 433-F for individuals; 433-B for businesses) that show they are either breaking even or owing money every month;
- They have federal tax liens filed against them;
- They have no assets or cannot access the equity in their assets, for the following reasons:
- The assets cannot be sold;
- Selling the assets would not cover the tax debt in full;
- The taxpayer was denied a loan against the collateral of the assets;
- Selling the assets would create a financial hardship;
- The assets are otherwise encumbered.
- During the period the CNC agreement is in effect, the taxpayer must not accrue new liability and must make all payments on time.
- After the two-year period expires, the IRS will ask the taxpayer to re-verify their financial condition. If they are still unable to make payments toward their past due debt, their CNC status will be renewed for another 24 months. If their financial condition has improved, they can take advantage of another resolution option to pay off their debt.
- As with any time a taxpayer owes money to the IRS, all refunds will go to the IRS to help pay off the debt during the CNC period.
Benefits of CNC Status
- This temporary relief period can be absolutely critical for small business or self-employed individuals who need to pay off other debt. CNC status can provide valuable breathing room, allowing taxpayers to make voluntary payments toward the debt or focus on making estimated tax payments and staying current with their filings.
- Once a taxpayer is enrolled into CNC status, the IRS must stop all collection activities such as bank account levies and wage garnishments.
- During this period, the clock continues to run on the debt’s statute of limitations (CSED).
Feel like you deserve a break from the IRS? You might just be right! Reach out to our team of licensed tax professionals to see if you qualify for Currently Not Collectible status.