Currently Not Collectible (CNC)
In some cases, a taxpayer has no ability to pay his or her tax debts. There simply is not enough money in the monthly budget. After submitting certain financial forms along with substantiating documents, and participating in robust negotiations, we are often able to assist the IRS in declaring a taxpayer’s account as “currently not collectible”. At that point, the IRS must cease all collection activity, including levies and garnishments.
What it Means to Be Currently Not Collectible
Interest and penalties continue to accrue on the outstanding tax debt placed in currently not collectible status. However, the 10-year statutory period during which the IRS can collect the taxes is not paused and continues to run. If the statute of limitations for collecting the tax debt expires while the account is in currently not collectible status, the IRS is permanently barred from collecting the outstanding tax.
The taxpayer will be required to provide updated financial disclosures on an annual basis to remain in a currently not collectible status. Of course, if the taxpayer’s financial condition improves, the IRS can remove the CNC designation and resume collection activities. Any periods of currently not collectible status are indicated on the taxpayer’s tax transcript with the transaction code TC 530.
How to Obtain Currently Not Collectible Status
To qualify for currently not collectible status, we must generally establish that:
- The taxpayer’s monthly income does not exceed his or her allowable expenses, and that there are no excess funds each month for the IRS to garnish
- The taxpayer does not have any assets or property worth levying
- The taxpayer’s financial condition is not expected to improve in the near future
When to Seek CNC Status
Obtaining currently not collectible status is often the best approach in cases where an installment agreement or offer in compromise is not appropriate, and the statute of limitations for collecting the tax debt is about to expire.
If you have been assessed substantial taxes that you cannot afford to pay, call the Business Law Group today, at (719) 355-8840, and let one of our experienced tax attorneys evaluate whether you are eligible for currently not collectible status.