Obtaining “Currently Not Collectible” Status for IRS Tax Debt Relief
There are instances where you agree you owe money to the Internal Revenue Service (IRS), but you simply lack the funds to pay the amount owed. If you find yourself in this situation, do not give up hope. You have options. For example, if the IRS determines that you are unable to pay both your taxes and basic living expenses, there is a possibility the IRS could place your account into a status known as Currently Not Collectible (CNC).
Benefits of CNC Status
When your account is placed into CNC status, the IRS generally will cease all efforts to try and collect the amount owed from you. In effect, you are given a level of IRS debt relief for a period of time. Thus, the IRS will not attempt to garnish your wages or freeze your assets.
Drawbacks of CNC Status
Having your account assigned to CNC status does not provide permanent IRS tax relief. Instead, the IRS will still levy interest and penalties on your account. In addition, the IRS has the option to retain your tax refunds and apply them to your balance. You will also continue to receive an annual bill from the IRS.
It is also important to understand that the IRS maintains the discretionary authority to grant or deny a request for CNC status. This means that, prior to the IRS placing your account in CNC status, the agency may require you to file any past due tax returns and ask you to provide certain financial information in order to validate your financial hardship.
Steps to Take to Secure the CNC Status from the IRS
If, based on your specific circumstances, you believe obtaining the CNC status will benefit your situation, there are certain steps that need to be taken, including:
- Continue making payments towards estimated taxes.
- File your tax returns for the prior year. You should file, even if you are unable to pay the amount owed in federal taxes currently.
- Continue to file your returns on time even if you can’t pay. This will prevent late filing penalties.
- Compile certain documents to help verify your income, expenses, and any debts you owed. This is necessary since you may need to provide financial information to the IRS so it can assess whether to grant your request for CNC status.
If the IRS reviews your financial information and determines that you can, in fact, make payments towards your tax debt and you disagree with this assessment, you could consider taking the following actions:
- Seek a meeting with an IRS Collection Manager
- Retain the services of an experienced and respected tax relief attorney to review your case and represent you.
- File an appeal challenging specific collection taken by the IRS (your attorney can handle this as well).
You do not get the peace of mind of permanent IRS debt relief when your account is in CNC status. In fact, the IRS will likely engage in an annual review of your income to see if it can collect on the balance owed, depending on if your financial situation has improved.
Have Questions About Obtaining IRS Tax Relief? Contact an Experienced Tax Attorney Today
Whether you are facing issues with your business’s finances or personal finances, the tax lawyers and professionals of Anderson Bradshaw Tax Consulting are ready and able to help. We possess more than three decades of experience handling complex tax disputes for individuals and companies. We know the law and can apply that knowledge to benefit your case. When you hire AB Tax Consulting, you will have the confidence and peace of mind in knowing your difficulties with the IRS can be resolved and corrected quickly and efficiently.