Are you unable to pay taxes because of your current financial situation? Currently Not Collectible status placement may be a good option for you! Polston Tax Resolution & Accounting can help. We bring years of experience and legal insights to help you navigate tax challenges and resolve issues. As a tax resolution services provider, we focus solely on delivering trusted solutions for tax-related challenges. Our goal is to meet critical needs and ensure you have what you need to move forward.
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What Is Currently Not Collectible Income?
According to the IRS, Currently Not Collectible (CNC) income is a term for financial resources that the IRS deems a taxpayer unable to pay in a given tax year. The IRS must conclude that the taxpayer cannot pay annual federal income taxes on this specific income. For taxpayers who receive this status, they have protection from persistent IRS collection tactics.
To receive the CNC designation, you will typically need to fill out IRS Form 433-F, Collection Information Statement, and submit it through the IRS Automated Collection System unit or to an IRS revenue officer. You must provide evidence of your inability to pay income taxes and demonstrate your willingness to negotiate your responsibility to pay taxes.
Choosing to negotiate can allow you to prove your commitment to paying off the taxes owed when possible in the future. It supports that you are working to be compliant but genuinely do not have the funds available at this time.
Who Can Use Currently Not Collectible Income?
Currently Not Collectible status may be a good option for you if you have little to no income. If you cannot pay taxes because your monthly income is less than your monthly expenses, the IRS may allow you to temporarily pay nothing at all and avoid seizure of the few assets you may have. If the amount you pay for food, clothing, health care, housing, transportation and household expenses meets or exceeds the amount of money you make every month, you qualify for a Currently Not Collectible IRS Status.
Currently Not Collectible Status (CNC) is a status for taxpayers experiencing financial hardship that defers paying outstanding taxes owed until their financial situation improves. The Internal Revenue Service may place your account in an IRS Current Not Collectible status automatically if they determine you are unable to pay – however, this does not usually happen. In most cases, you will have to prove your inability to pay by providing evidence and submitting various forms and documentation to prove your eligibility. If you find yourself in a situation where you must apply for Currently Not Collectible status, Polston Tax Resolution & Accounting can provide information regarding the process and whether or not you may qualify.
Key Considerations for Currently Not Collectible Options
If you’re evaluating your options for Currently Not Collectible status, you’ll want to keep a few primary considerations in mind. It is possible to maintain CNC status long enough to be no longer responsible for your taxes, but you must use the correct strategy and try this approach in the right situation.
1. Tax Balance Collection
If you cannot pay the taxes you owe and the IRS does not come to collect this payment within 10 years, you will be free from responsibility for the unpaid taxes. However, the IRS has the right to collect your tax balance at any point after you can pay again.
2. CNC Status
Having CNC status is a temporary solution, and it’s important to treat it as such. You will not have to cover IRS levies when you qualify for CNC status, but you will still be responsible for any tax liens that may be on your property.
3. IRS Monitoring
After you qualify for CNC status, the IRS will continuously monitor your financial situation and flag when you can pay what you owe again. You’ll need to contribute your earnings to pay off taxes and IRS penalties if you sell your property. If your income increases for another reason, the IRS may notice it on reports from banks and employers, leading to you potentially losing CNC eligibility.
Eligibility Requirements for Currently Not Collectible Services
To be considered for a Currently Not Collectible status, you must meet the IRS’s definition of “significant hardship,” which is only met if the possibility of paying your taxes threatens you with “serious privation.” When analyzing whether your income meets this criterion, the IRS considers interest, dividends, net profits, distributions and other income in addition to your wages. The IRS uses the following requirements to determine if you’re eligible for Currently Not Collectible Status:
- You make less than $84,000 a year.
- You have no leftover money after paying for your basic monthly living expenses.
- You are unemployed and have no additional source of income.
- Your only source of income comes from unemployment, welfare or Social Security benefits.
- Your tax balance collection’s 10-year statute of limitations is about to run out.
The Qualification Process
Any taxpayer who cannot make monthly payments on taxes owed may apply for CNC status with the IRS, but they will need to demonstrate their inability to pay.
Once the IRS has determined that you qualify for Currently Not Collectible status, they will be unable to garnish your wages and levy your bank accounts. This system gives you a respite from tax collection while you are getting back on your feet financially, yet the amount you owe in taxes will not go away or decrease. You will still owe all past-due taxes, and they may continue to accumulate penalties and high interest rates. You’ll need to address this risk with strategic solutions to meet your requirements.
You’ll likely follow these main steps in the process:
- Apply for CNC status: Any taxpayers unable to pay their monthly tax balance may apply for CNC status. The taxpayer will need to disclose their gross monthly income in the applications process.
- Provide a monthly expenses outline: The next step for taxpayers will be to provide an outline of their monthly allowable expenses — costs associated with welfare, health, production of income and other necessary expenditures. To determine how much the taxpayer could pay currently, the IRS needs to see all liquefiable assets.
- Calculate back-tax liability: Finally, taxpayers are responsible for calculating their back-tax liability with the IRS. Eligibility for CNC status will usually depend on allowable monthly expenses exceeding monthly income and liquefiable assets being significantly less than total IRS back-tax liabilities.
Keep in mind that if your income status changes at any point, you will most likely lose your CNC status and be required to make monthly payments again.
How to Obtain Currently Non-Collectible Status
If you choose to seek CNC status, you can contact the IRS directly and fill out Form 433-F, Collection Information Statement, to apply. Ensure that you obtain an updated tax balance due sheet from the IRS and keep records of your interest and penalty amounts. You’ll need to know the exact balance you owe up to the current date.
Another way to apply for CNC status is to file a tax return and begin the application process then. Ensure that you document and store all receipts as evidence of the request you mailed to the IRS.
Finding the right options for your tax-related requirements calls for trusted resources to help. You’ll want to discuss your concerns with our team and allow us to review your current financial status. We can help you decide if obtaining CNC status is worthwhile for your situation.
If a CNC status is the best fit for your needs, we’ll handle the process for you and streamline the application process. We can work directly with the IRS and ensure you have representation you can rely on for your financial concerns.
Find Out Whether You Qualify for Currently Not Collectible Status
If you need trusted services to help you navigate tax payments and issues, our team can help. We offer knowledgeable consulting and other services to meet your needs and streamline your requirements.
Our team can also provide you with ongoing consulting and assistance when it comes time for renewal. IRS Currently Not Collectible (CNC) status is typically reviewed every two years to verify that a taxpayer’s financial situation hasn’t changed. If it is found that the taxpayer no longer requires CNC status, the IRS will take the account out of CNC status and begin collecting taxes. In most cases, CNC status is continued until the collections periods expire. If you are retired, or are sure that your income level won’t change, Currently Not Collectible may be the best option for you.
However, in order to know for sure, contact us today to determine whether or not you qualify. You can call us confidentially at 844-841-9857 or fill out the form below to schedule your free consultation.