What is Currently Non-Collectible (CNC)?
If you agree that you owe money to the IRS but your financial situation makes it impossible to pay what you owe without causing financial hardship or resulting in your inability to pay for your basic living expenses, you may qualify for a Currently Non-Collectible status. Currently Non-Collectible is a status in which the IRS cannot collect on tax debts or liens from you.
When the IRS deems your account Currently Non-Collectible, they will typically refrain from collecting any tax debt from your account by force (i.e., levying your assets). If you are behind on your tax payments and you are receiving collections communication from the IRS, this status also stops the IRS from sending you collection letters and calling you as they halt all attempts at collecting from accounts with this status.
Currently Non-Collectible 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.
If the IRS finds that at any point from 10 years to the date that your account was assessed as Currently Non-Collectible, that your financial situation has improved, they can collect that tax debt.
If after 10 years, your financial situation has not improved, 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 that your wages and assets cannot be collected to relieve your tax debt without causing 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, even 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:
What Are Basic Living Expenses?
The IRS will calculate your living expenses and subtract them from your wages, if they find that there is nothing left over or that what is left over would potentially put you at a financial disadvantage and stop you from being able to cover miscellaneous basic living expenses, they will consider your account Currently Non-Collectible.
Currently Non-Collectible status is beneficial for those who are facing delinquent charges on their tax account and have exhausted all other options for paying their tax debt such as making installment payments. They simply cannot afford to pay their tax collection debt without becoming unable to cover their basic living expenses. It is important to note that you cannot ignore your tax situation because you are on Currently Non-Collectible status because if you experience any new tax liability while on CNC, you will lose your CNC status.
The application process for Currently Non-Collectible status involves many calculations and the submission of many forms. It is beneficial to speak to a tax professional when considering filing for Currently Non-Collectible status due to the complicated process. Currently Non-Collectible status is only a temporary solution and should your financial situation improve, it is best to seek the advice of a tax professional in order to best proceed. 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.