Currently Not-Collectible
The IRS grants currently not-collectible (CNC) status to taxpayers who cannot pay their tax debt. This is a temporary designation to delay the collection process. This status does not mean, however, that the taxpayers’ tax debt goes away. While taxpayers are on CNC status, their tax debt increases because penalties and interest are charged until they pay their tax debt in full.
During this status period, the IRS may also ask taxpayers for updated financial information to reassess the taxpayers’ ability to pay. The IRS may even file a Notice of Federal Tax Lien to protect the government’s interest in the taxpayers’ assets.
How to Apply for CNC Status
If taxpayers cannot pay any part of their tax debt, the IRS may ask taxpayers to complete a Collection Information Statement (Form 433-F, Form 433-A, or Form 433-B) and provide proof of their financial status (information about their assets, monthly income, and expenses). This is done prior to approving any requests for CNC status.
Fixed Period for CNC Status Determined by IRS
Typically, CNC status is set for a fixed period of time as decided by the IRS. This period is generally determined based on the taxpayers’ Total Positive Income (TPI) – which is the total taxable income from all sources as shown in the tax return. Once the set time period for the CNC status comes to an end, the status is reviewed again. This usually happens at the time the TPI is calculated annually when the next tax return is filed.
When new returns are filed and the IRS determines that the financial situation of taxpayers has improved, the IRS will look to collect the balance owed. In such cases where taxpayers are not eligible for an extension of the CNC status, they will most likely need to negotiate an Installment Agreement or Offer in Compromise with the IRS to settle the tax debt. To be eligible for an Installment Agreement or Offer in Compromise, taxpayers must file all required tax returns.
How Rockwater Associates Can Help
Rockwater Associates has successfully helped thousands of people just like you overcome tax debt, small or large. With decades of experience working with the IRS and every State, we are your best hope of reaching a better deal. Almost everything is negotiable, including back taxes.
If you choose to partner with Rockwater Associates, you will be working with some of the industry’s brightest and most experienced professionals. Our communication, honesty, and transparency in our processes make us the right choice to provide a solution to your tax lien problem. Our number one priority is providing you with a great customer experience.
Our tax professionals at Rockwater Associates have successfully helped many individuals and small businesses resolve their tax concerns, including filing for currently not-collectible status when it is financially necessary to delay collection.