Out of many IRS debt relief collection schemes, there is a program called Currently Not Collectible (CNC) status. If the taxpayer cannot pay their tax debts immediately but is willing to pay later, they can apply to IRS for CNC status.
If the IRS determines and believes in your undertaking and finds the tax debt is not collectible, it will temporarily stop all collection actions against the taxpayer. This means the IRS will not issue levies, garnish wages, or seize assets while the taxpayer is in CNC status. However, it is essential to note that interest and penalties will continue to accrue on the unpaid tax balance.
Temporary IRS debt relief procedure & eligibility
To be considered for CNC status, taxpayers must demonstrate to the IRS that they are facing financial hardship and that paying their tax debts would create an economic problem. The IRS typically requires detailed financial information from taxpayers to decide whether they qualify for CNC status.
To request CNC status, call IRS at 800-829-1040 or call the phone number on their bill or notice. or write a request. Taxpayers can also use the Online Payment Agreement application on the IRS website to request CNC status.IRS will gather various kinds of information through Collection Information Statement (Form 433-F, Form 433-A, Form 433-B along with proof of your financial status.
In addition to the request, the taxpayer must provide detailed financial information to the IRS. This will typically include the following:
- Income and expense information, including wages, self-employment income, rental income, and other sources of income.
- Asset information, including bank accounts, retirement accounts, and other assets.
- Expense information includes rent or mortgage payments, utilities, transportation, and other living expenses.
Based on this information, the IRS will determine whether the taxpayer is eligible for CNC status. If the IRS approves the request, it will suspend all collection actions against the taxpayer. However, it is essential to note that taxpayers must continue to file their tax returns and pay any taxes due while in CNC status.
If the taxpayer’s financial situation improves, the IRS may remove the taxpayer from CNC status and resume collection actions. additionally, if the taxpayer fails to file tax returns or pay taxes that come due while in CNC status, the IRS may also remove the taxpayer from the program and resume collection actions.
IRS debt relief guidance on CNC status
The IRS has issued several guidance documents and publications that provide information on CNC status and the criteria for determining whether a taxpayer is eligible for the program. One such publication is the Internal Revenue Manual (IRM) section 126.96.36.199, which outlines the requirements for deciding CNC status and provides guidance on granting and revoking CNC status.
In addition to the IRM, the IRS has issued several revenue procedures and notices that guide CNC status. For example, Revenue Procedure 2015-47 outlines the procedures for submitting a request for CNC status. Notice 2017-7 guides the use of CNC status in conjunction with the Offer in Compromise (OIC) program.
Will charging of the interest & penalties also be suspended?
While the program does not eliminate the taxpayer’s tax debt, it can provide temporary relief from collection actions and give taxpayers time to get back on their feet. However, the interest charge or penalties for the tax debt shall continue even if you are granted CNC status.IRS may also keep your refunds and apply them to your debt.
If you are having a tax debt problem, hiring a tax attorney or tax debt lawyer will smoothen your debt settlement with IRS as tax professionals will find the most suitable IRS debt relief programs suitable to your situations.
While the information on this site - Internal Revenue Code Simplified-is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.