The only thing more stressful than a tax bill is a tax bill you can’t pay without cutting into your necessary living expenses. Fortunately, the IRS won’t force you to pay if it means you can’t provide food or housing for your household.
If even paying a portion of your tax liabilities would lead to financial hardship, you may be able to temporarily suspend collection.
If paying any portion of your tax bill cuts into necessary living expenses for yourself or your family, you may be eligible to freeze IRS collection actions. IRS CNC status provides you with time to get back on your feet. Once your financial situation has improved, the IRS can resume collections.
When the IRS grants you CNC status, you get more time to focus on improving your financial situation without having to worry about escalating collection actions from the IRS. However, what this status can do is limited.
Sometimes taxpayers find themselves in temporary dire straits where choosing to pay a portion of their tax bill would result in not being able to meet one or more of their necessary living expenses. In these cases, taxpayers can opt to report their tax obligation as CNC to the IRS and temporarily suspend collection efforts.
CNC status means the IRS has determined that you cannot meet your tax obligation at this time, while also taking care of your necessary living expenses. CNC is not a permanent forgiveness of all or part of your tax debt. Instead, CNC is a temporary delay of collection efforts by the IRS until your financial situation improves.
While the IRS may delay collection efforts, it likely will not forgo filing liens against your assets while your account is CNC. The IRS files a tax lien when placing a taxpayer into CNC status if they have not already done so. A tax lien is a claim to your property and signifies to other creditors that the IRS has legal rights to your assets. If you sell an asset with a tax lien, the IRS gets paid first before you or other creditors receive any proceeds.
It’s also important to note that the IRS does not suspend interest or penalties. In fact, both continue to accrue while you are in CNC status, thus adding to your overall tax bill.
CNC status usually lasts somewhere between six months and two years. The IRS will review the taxpayer’s financial status through tax returns submitted while on CNC status. If the taxpayer’s status improves, the IRS may revoke the CNC status.
The IRS will also revoke the CNC status if a new tax debt is incurred by the taxpayer.
Unlike applying for an Installment Agreement or Offer in Compromise, there is no official form or application for Currently Not Collectible status. Instead, you can request CNC status by calling the number on your most recent notice or by calling the IRS at 800-829-1040.
Before placing your account in CNC status, the IRS will likely ask you to complete Form 433-F, Collection Information Statement to prove your financial status. This form requests information about your assets, income and expenses. The IRS will look at your bank accounts, investments, real estate, and other assets including cars and life insurance policies.
If you are employed, the agency will request employer and wage details. If you are self-employed, it will ask about your business accounts receivables, as well as information on business credit cards.
The IRS will also evaluate your monthly living expenses, including:
Note that the IRS may not share your opinion on what qualifies as a vital monthly living expense and may ask you to dispose of assets to pay your bill. While it usually doesn’t ask you to sell your only home or car, it might not see luxury assets, such as a second home, as vital and may ask you to sell or borrow against it.
If you have no hope of paying any portion of your tax bill while also meeting your living expenses, a tax attorney can help you review your options to get tax relief, including applying for Currently Not Collectible status.
Wiggam Law provides attentive, personalized guidance and extensive expertise negotiating with the IRS to help our clients find tax relief. We show you whether CNC status can help you resolve your tax situation, guide you through the process of applying for CNC status, and represent you in front of the IRS if need be.
Reach out to Wiggam Law today. Call 404-233-9800 or contact us:
