Hello and welcome! Here, in our Tax Resolution Services series, we’re discussing some of the different opportunities available to individuals and businesses to help them manage their tax debt. In our previous blog posts, we discuss some of the tax resolution services that can help individuals or businesses actually settle with the IRS for less than the total amount they owe. These tax resolutions services are Offer in Compromise and the Partial Payment Installment Agreement.
To learn more about Offer in Compromise, which allows taxpayers experiencing financial hardship – or potential financial hardship, if they were to repay the entirety of their tax debt – to potentially settle their debt to the IRS for less than the original amount owed, view our previous blog post, Tax Resolution Services: Offer in Compromise, or our Offer in Compromise Service Page. Meanwhile, the Partial Payment Installment Agreement allows taxpayers a similar opportunity, but the debt is repaid in installments, rather than in one big lump sum. To learn more about the differences between the two, read our previous blog post, Partial Payment Installment Agreement vs. Offer in Compromise – What are the differences?
Currently Non-Collectible: What is it?
Currently Non-Collectible, also known as CNC, is a bit different from the previous tax resolution services, as it does not allow a taxpayer to settle their debt with the IRS for less than is owed. But rather, Currently Non-Collectible can help to essentially pause IRS collection activities and payments. However, there are certain parameters to the Currently Non-Collectible option that can make the Currently Non-Collectible tax resolution service potentially treacherous.
First and foremost, just like Offer in Compromise and the Partial Payment Installment Agreement, to apply for the Currently Non-Collectible tax resolution opportunity, a taxpayer must be able to demonstrate that they are experiencing financial hardship by making their current payments to the IRS. However, experiencing financial hardship is not something one can just declare, but rather, something that is determined by the IRS. To learn more about the financial hardship designation, read our previous blog post about Offer in Compromise Requirements.
Another point to note when it comes to Currently Non-Collectible, is mentioned by the IRS on their webpage Temporarily Delay the Collection Process. As of Dec. 7th, 2020, the IRS page states the following with regards to Currently Non-Collectible:
“If we determine that you cannot pay any of your tax debt, we may report your account currently not collectible and temporarily delay collection until your financial condition improves. Being currently not collectible does not mean the debt goes away, it means the IRS has determined you cannot afford to pay the debt at this time…You should know that if we do delay collecting from you, your debt will increase because penalties and interest are charged until you pay the full amount. During a temporary delay, we will again review your ability to pay.”
As we note on our Currently Non-Collectible Service Page, 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.
That’s why going the Currently Non-Collectible route can be tricky. Because even though your payments and the IRS’s collection activities have stopped, your debt is still growing.
If you’re struggling with tax debt, speak with one of the tax resolution specialists at Bullseye Tax Relief today.
In our upcoming blog posts, we’ll continue discussing tax resolution services. Penalty Abatement is next!