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A Simple Guide to Currently Not Collectible (CNC) Status 

A Simple Guide to Currently Not Collectible (CNC) Status 

Facing financial hardship can be an incredibly stressful experience, especially when dealing with tax debt. Fortunately, the Internal Revenue Service (IRS) offers a program known as “Currently Not Collectible” (CNC) status, which can provide temporary relief for taxpayers who are struggling to meet their tax obligations. Here, we’ll provide a straightforward guide to understanding CNC status, how to qualify for it, and the benefits it offers in times of financial hardship. 

Section 1: What is Currently Not Collectible (CNC) Status? 

Currently Not Collectible (CNC) status is a designation by the IRS that temporarily halts the collection of unpaid tax debts. It is not a forgiveness of the debt, but rather a recognition that the taxpayer is currently unable to make payments without suffering significant financial hardship. CNC status is typically granted to individuals and businesses who meet specific criteria. 

Section 2: Qualifying for CNC Status 

To qualify for CNC status, you must demonstrate that paying your tax debt would result in significant financial hardship. The IRS evaluates your financial situation and considers several factors to determine eligibility. Here are the key requirements: 

  1. Inability to Pay

You must prove that you cannot afford to pay your tax debt in full, either as a lump sum or through installment payments, without suffering undue financial hardship. The IRS will assess your financial situation to determine if you meet this criterion. 

  1. Financial Documentation

The IRS requires you to provide a detailed financial statement outlining your income, expenses, and assets. This documentation is crucial in demonstrating your inability to pay. Be prepared to provide proof of your financial situation, such as bank statements, pay stubs, and bills. 

  1. Compliance with Tax Filings

You must be current with all required tax filings. This means you must have filed all necessary tax returns, including the current year, if applicable. Failure to file required returns can disqualify you from CNC status. 

  1. Monthly Necessary Living Expenses

The IRS will assess your monthly necessary living expenses. These expenses typically include items like rent or mortgage payments, utilities, groceries, transportation costs, and healthcare expenses. The IRS uses national and local standards to determine the allowable expenses for your area. 

  1. Monthly Disposable Income

The IRS will calculate your monthly disposable income by subtracting your allowable expenses from your income. If your disposable income is insufficient to cover both your necessary living expenses and your tax debt, you may qualify for CNC status. 

  1. Asset Equity

The IRS may also consider the equity in your assets, such as real estate or valuable personal property. If the sale of your assets would not generate enough funds to cover your tax debt, this can work in your favor when applying for CNC status. 

Section 3: Applying for CNC Status 

If you believe you meet the qualifications for CNC status, the next step is to apply. Here’s how to go about it: 

  1. Contact the IRS

Reach out to the IRS to request CNC status. You can do this by contacting the phone number provided in your tax notice or by reaching out to the IRS directly. Be prepared to explain your financial situation and why you believe you qualify for CNC status. 

  1. Provide Financial Documentation

The IRS will request a detailed financial statement from you to assess your ability to pay. Ensure you gather all necessary documentation to support your request. 

  1. Await IRS Evaluation

Once you’ve submitted your request for CNC status and provided the required documentation, the IRS will evaluate your financial situation. This process can take some time, so it’s essential to be patient. 

  1. Communication is Key

Stay in contact with the IRS throughout the evaluation process. Be prepared to provide any additional information or documentation they request promptly. 

Section 4: Benefits of CNC Status 

Securing CNC status can offer several benefits to taxpayers who are facing financial hardship, including: 

  1. Temporary Relief

CNC status provides temporary relief from the collection of your tax debt. During this period, the IRS will halt collection actions, such as wage garnishment, bank levies, and property liens. 

  1. Reduced Financial Stress

By pausing collection efforts, CNC status can significantly reduce immediate financial stress, allowing you to focus on improving your financial situation. 

  1. Time to Recover

CNC status provides you with time to recover financially, find a stable source of income, or address other financial difficulties that may have contributed to your tax debt. 

Section 5: Maintaining CNC Status 

It’s important to note that CNC status is not a permanent solution. The IRS will periodically review your financial situation to assess your ability to pay. Here’s how to maintain CNC status: 

  1. Stay Current with Tax Filings

Continue to file all required tax returns on time. Failure to do so may result in the revocation of your CNC status. 

  1. Respond to IRS Requests

Cooperate with the IRS by promptly responding to any requests for updated financial information or documentation. 

  1. Report Changes in Your Financial Situation

If your financial situation improves or changes significantly, it’s crucial to inform the IRS. Failure to report improvements could result in the loss of your CNC status. 

Conclusion 

Currently Not Collectible (CNC) status is a valuable tool for individuals and businesses facing financial hardship due to tax debt. By demonstrating your inability to pay without suffering undue financial hardship and providing the necessary financial documentation, you can secure temporary relief from IRS collection actions. Maintaining open communication with the IRS, staying current with tax filings, and cooperating with their requests are essential to retaining CNC status. CNC status can provide breathing room for those in challenging financial situations, allowing them the opportunity to rebuild their financial stability and address their tax debt in the future. 

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FAQs

 The simple answer is no. A business and a person are completely separate, thus, any personal tax debts or liabilities should not affect your business.

Tax debt can be an exhausting and complicated thing to deal with on your own. Communicating with the IRS and professionally handling your tax liabilities are just two of the services companies like Priority Tax Relief can offer.

No. The IRS’s Innocent Spouse Relief protects you from paying these additional taxes. However, this does not relieve you from household employment taxes, business taxes, individual joint responsibility payments etc. Priority Tax Relief helps you learn more about innocent spouse relief.

The most popular option to date would be an Offer In Compromise (OIC). At Priority Tax Relief, we help tax relief help become more accessible to taxpayers in need and help them understand how they can qualify for these options.

IRS tax liens are legal claims on your property when you do not settle your tax debts. The IRS usually sends out a notice when no payment has been made after a liability assessment. Find out more about tax liens with Priority Tax Relief.

Yes. Not only can the IRS put a claim on all your current property, tax liens can also affect any property or intangible or tangible assets that you obtain in the future. At Priority Tax Relief, we help you understand federal tax liens and how to communicate with the IRS.

 

Tax levies are the actual seizure of your property and are different from legal claims or tax liens. Settle your taxes before the IRS sends out a notice. Priority Tax Relief helps you understand tax levies and how you can avoid them.

Yes. Not only can they seize physical property but they can also legally take hold of the money in your bank account and other wages. To avoid this from happening, contact Priority Tax Relief now.

Your debt will, unfortunately, continue to grow and you will possibly lose a great number of your assets. It is definitely a scenario we do not wish to see happen to anyone, that’s why Priority Tax Relief makes sure that our help becomes within reach.

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