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Filing your taxes, even when you are not able to pay them, is a must. You cannot settle with the IRS unless you are compliant with your tax returns.

 

It isn't against the law to owe the IRS tax debt, it is against the law to have unfiled tax returns. Should you agree with the Internal Revenue Service (IRS) that you owe a tax debt, but you cannot pay, the IRS may place your account in “CNC,” or Currently Not Collectible, status. For those who are unable to meet their tax burden, CNC can be a financial lifesaver.

 

A taxpayer may want to seek Currently not Collectible status if their IRS debt is less than $10,000, which is the minimum to file an Offer in Compromise.
 

 

 

Currently not Collectible - IRS Hardship

Understanding Currently Not Collectible (IRS Hardship) Status


Essentially being in Currently not Collectible (CNC) will provide you with protection from the IRS enforcement against your assets (tax lien, tax levy, seizures, wage garnishment, etc.). Being placed into CNC status does not mean that your IRS debt is settled. To settle your tax debt, you need to submit an Offer in Compromise.

 

CNC does not mean that you do not have to ever pay the money you owe the IRS, or (IRS Hardship) that the IRS will not assess penalties (like late fees) against you during the time you remain in CNC.
 

Section 5.16.1.2. of IRS Code explains the different situations in which an account may be moved to CNC status. For example, CNC status may be granted when:

A. Collection of taxes would create “a hardship for taxpayers” that leaves them unable to meet the basic cost of living expenses;

B. When an individual dies and there is no collection potential from their estate;

C. When a taxpayer (or their assets) cannot be located; or

D. When a taxpayer cannot be contacted, even though the location is known.

 

 

You may have heard of being "Currently not Collectible" as IRS uncollectible, IRS hardship, Currently non-collectible, or CNC. It's all the same and when you are in Currently not Collectible status, the IRS will leave you alone for approximately 18 to 24 months. During this period of time, the Statute of Limitations will continue to run out.

 

CNC can be renewed and revoked. Every month on Currently Not Collectible status is one less month that the IRS can collect the tax debt. Yes, there will be a federal tax lien filed but credit reporting services have stopped posting tax liens. The tax debt may just go away by running out the collection clock.

 

How to Obtain CNC Status

 

As stated above, CNC status can be an essential part of financial health for those who have a tax liability but are unable to pay it. An experienced tax attorney can help to guide you through the steps of applying for CNC status, which include proving that you do not have any assets to pay your tax burden.

 

To prove this, you must fill out and file several forms, including Form 433-A. This is a highly comprehensive financial form that should be filled out with a knowledgeable tax attorney. You will also need to include a copy of your tax return, proof of living expenses (including healthcare and transportation), and more.

The status of Currently Not Collectible (IRS Hardship) means precisely what you think. When it has been proven to the IRS that you are unable to pay on your tax liability or the assessed penalties and interest under the following circumstances:

 

a. Personal income covers only your essential living costs with no leftover money that the IRS can take

b. Lack of valuable assets subject to levying

 

Note that the IRS is not allowed to seize an asset that has less than 20 percent equity in the item or if the expense involved in seizing and selling is higher than the value of the equity

Although the idea of having nothing worth taking is not the ideal position to be in, it can help with dealing with the IRS. If your tax liability is considered uncollectible, collection activities by the IRS will be halted. While the IRS will be unable to collect against you, interest and penalties will continue to accrue on your tax debt.

 

To learn more about the tax relief program known as Currently not Collectible (CNC) status, contact Flat Fee Tax Relief today.

 

 

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