What does Currently Not Collectible mean?

Currently not collectible is the status which the IRS places on people who are unable to pay their tax debt.

Currently not collectible (CNC) status means that your tax payments are postponed for a later time otherwise known as a deferred payment.

Each year, taxpayers are required to file a return and some may owe taxes. If you are unable to pay your taxes owed, you may set up a payment plan with the IRS, also known as an “Installment Agreement” or you may qualify for an “Offer in Compromise.” What about those who can’t afford to pay?

If you are unable to pay your taxes, you may apply for the CNC status. With a CNC status, your tax payments are deferred until your situation improves.

How to qualify for Currently Not Collectible status?

Talk to a tax professional to properly prepare your financial statement.

The IRS may require you to file a financial statement (called a Form 433) and may also require you prove your monthly income with paystubs, bank deposits, and monthly living expenses (with receipts).

In order to qualify for a CNC status, you must prove that you are unable to pay. That means you will need to document your financial situation. The IRS will look into your bank accounts to see if you have the means to pay the debt. If you do not have any assets, the IRS will require that you document your average monthly income and necessary living expenses. Their objective is to see if you are able to pay with an “Installment Agreement.”

Currently Not Collectible status protects a taxpayer from the enforced collection efforts of the IRS, by removing the taxpayer’s back tax account from active collection status. The IRS has requirements that an account must meet before it can be placed in a Currently Not Collectible status. Once the account is placed in a Currently Not Collectible status, the IRS does not pursue collection activity against the taxpayer and the statute of limitations on the tax liabilities will continue to run. Unless the taxpayer’s financial situation changes, the account will remain in a Currently Not Collectible status until the tax liabilities expire.

If you are unsure on how you can pay your tax bill, consider consulting with our team of tax experts who can help you understand your options. Our firm can help prepare all the necessary documents needed in order to qualify for CNC status.

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