A lot of people get into tax trouble simply because they cannot afford to pay the taxes they owe. Either they had a medical emergency or their business slowed down or closed or they lost their job. By the time the tax bill comes around, they no longer have enough money to pay the taxes. It’s either they pay their taxes or they pay their rent. We understand circumstances change and that sometimes hard decisions need to be made. That’s why we help people get into Currently Not Collectible Status (CNC). CNC status allows people that are in financial hardship situations to defer paying their tax bills until their situation improves.
Currently Not Collectible
CNC status is to help people who can’t afford to pay both their living expenses and their tax payments. CNC is designed for taxpayers who are experiencing financial hardship, such as unemployment or medical problems. CNC pauses the IRS collection process, meaning you don’t have to worry about getting letters or threats of a levy from the IRS while you are in CNC. You will, however, get a yearly notice of how much you owe from the IRS. Once you are placed in CNC, the IRS will suspend all collection and enforcement activity. If you have a wage garnishment or bank levy, the IRS will release those once your status is approved. The IRS will likely place a tax lien on you once you are placed in CNC. The IRS may also keep all tax refunds while you are in CNC and apply them to your tax balances. Penalties and interest will continue to be assessed in the event that your situation improves and you are able to pay your taxes owed. CNC is meant to be a temporary status for taxpayers that helps them get through financial hardship. The IRS can review your status and ask you to submit new financials if they think your financial situation has improved and you can now make payments towards your taxes owed. They will look at your federal tax returns to see if your income has increased or if you are spending less money on expenses. If you are in CNC and your balances reach their collection statute expiration date, then those balances are then wiped off and you will not have to worry about paying back that particular balance. Collection statute expiration dates mean the IRS has 10 years from the day you filed the tax return to collect on that balance.
How Do I Qualify For CNC?
If you are wanting to be placed into CNC status, you must prove to the IRS that you cannot afford to pay on the taxes you owe. To do this, you will need to show and substantiate your financial situation to the IRS. The IRS will look at all your sources of income and see how much money you are actually making. It will then look at your expenses like rent, utilities, out of pocket healthcare, transportation, and other necessary living expenses. They will then subtract your expenses from your income and see how much money is leftover. This will result in your monthly disposable income (MDI). If you have a high MDI, the IRS will not approve your CNC status, as you have the ability to pay on your taxes owed. If you have a low or negative MDI, the IRS may approve your CNC status, as you don’t have the money to pay. When proving your MDI, you will need receipts or proof of your expenses and be able to prove they are necessary or the IRS may throw certain ones out. If the IRS believes that paying on your tax balances would put you in an unfair economic position, it will place you into CNC.
If you are in tax trouble and cannot afford to make tax payments, then CNC status may be for you. A tax attorney can help you apply and prove to the IRS that you fit the need for CNC status. Polston Tax helps clients get approved for CNC status every year, and we can help you find the right IRS tax resolution for you. Give us a call at 844-841-9857 or schedule your free consultation.