Currently Not Collectible
What is Currently Not Collectible?
Just as it sounds, Currently Not Collectible or CNC, is a hardship status (Status 53) used by the IRS to classify a taxpayer that “currently” does not have the ability to repay his or her tax debt (see IRC Section 5.16.1)
Now, the key word here is currently. Those taxpayers that are granted Currently Not Collectible status will be checked up on by the IRS from time to time, to see if their financial situation has improved.
With that in mind, Currently Not Collectible is a great tool that the tax law provides us to seek relief from a tax burden we otherwise could not pay. To qualify for the Currently Not Collectible status, you must be able to prove (in detail) to the IRS that your current financial situation provides only enough to live on, and not enough to pay back your tax debt, or in doing so, would create an economic hardship. This financial information is provided to the IRS by way of a collection information statement (see IRS Form 433).
If you are approved for Currently Not Collectible status, the IRS is required to stop tax collection actions, including some of what they refer to as enforced collections (see IRS tax levies, IRS wage garnishment). You would however, still receive an annual statement; declaring the amount of tax debt still owed to the IRS.
Another benefit of the Currently Not Collectible status is that it does not stop the clock on the 10-year statute of limitations. So, it is possible, however unlikely, that depending on where a taxpayer is in the process, he or she can be granted Currently Not Collectible status on a tax debt that will expire while marked Currently Not Collectible.
A couple of items to bear in mind when determining if the Currently Not Collectible status is applicable to your situation; first, your idea of bare necessities and the IRS guidelines generally are quite different. Second, once you have submitted a request to the IRS for Currently Not Collectible status, the IRS will run their calculations and make a determination. If they determine you do not qualify, then they will immediately expect you to make payment arrangements for your tax debt.
This is a great example of why you need to have professional tax representation when exploring these types of options. A qualified tax professional will carefully assess all of your financial records in advance, and apply the same calculation methods as the IRS to predetermine if the Currently Not Collectible status would apply to you. As tax resolution specialists, our licensed tax professionals know many of the ins-and-outs of the Internal Revenue Code (IRC), and can help you best determine which options are right for you.
As previously mentioned, Currently Not Collectible is a great tool to consider when seeking relief from a tax debt you are unable to currently pay. However, it is not the only option available to you as a taxpayer.
To find out if Currently Not Collectible status is an option worth considering for you, or to explore other possible options with a tax professional, please give us a call today at (888) 918-8121, or fill out the short form on the right side of this page. The call is free, the consultation is free, and you are under no obligation to hire us.