What is Currently Non-Collectible (CNC)?
You may owe the IRS money but your financial situation makes it impossible to pay. Doing so, would cause financial hardship or result in your inability to pay for your basic living expenses. In this case, you may qualify for a Currently Non-Collectible status (CNC). Currently Non-Collectible is a status in which the IRS cannot collect on tax debts or impose liens.
When the IRS deems your account CNC, they will typically refrain from collecting any tax debt from your account by force (i.e., levying your assets). Furthermore, this status also stops collections communication from the IRS. They cannot send you collection letters or call you as they halt all attempts at collecting from accounts with this status.
CNC status does not stop the IRS from assessing interest and penalties on your account or withholding your refunds. It simply stops them from collecting on it. Furthermore, if your financial situation improves within 10 years of being given the CNC status, they can collect that tax debt. However, if your financial situation has not improved within 10 years, the IRS will likely wipe your slate clean and write off your tax debt, interest and penalties.
Are You Eligible for Currently Non-Collectible Status?
To be eligible for Currently Non-Collectible status, you must demonstrate that you are unable to pay off your tax debt. You must show proof through bank statements and other documentation of your inability to pay. Paying tax debts would cause financial hardship or the inability to cover basic living expenses. Typically, in order to be accepted for Currently Non-Collectible status, you must have filed all tax returns. This includes those that are past due or the IRS will request for you to do so. The IRS will determine you eligible for Currently Non-Collectible status if:
- Your wages cover no more than your basic living expenses.
- You have no assets worth levying.
What Are Basic Living Expenses?
The IRS will calculate your living expenses and subtract them from your wages. They will consider your account CNC if paying the tax debt leaves no money left to cover basic living expenses or creates a financial disadvantage.
Consequently, CNC status benefits those facing delinquent charges on their tax account. Additionally, this benefits those who have exhausted all other options, such as making installment payments. However, those on CNC status must keep current with their tax obligations or risk losing this protective status.
The application process for Currently Non-Collectible status involves many calculations and the submission of many forms. Only a tax professional can navigate the complicated CNC process. Once your situation improves, the advise of a tax professional can keep you on track. Typically, if you are CNC status and your financial situation improves, it is best to file for an Offer In Compromise. Give us a call today and we can help you decide if filing for Currently Non-Collectible status is the best course of action for you and your business. Visit our tax resolution page for more services.