- Even if you are already on an installment payment plan, you may qualify for a revised lower installment payment plan, based upon your change in circumstances.
- Alternatively, where you've lost your job, we may be able to put you in Currently Not Collectible (CNC) status with the IRS.
Currently Not Collectible (CNC) Status Defers Payment
Documenting Your Financial Situation to Qualifying for CNC Status.
First, the IRS will look for any nest egg that you may have, like a savings account, to pay your taxes if you don’t need it to pay for necessary living expenses.
If you don’t have any assets to pay the debt, the IRS will want you to document your average monthly income and necessary living expenses.
The IRS is looking to see if you can pay with an installment agreement.
The IRS may also ask you to file a financial statement (called a Form 433) and may even require you to prove your monthly income (with paystubs and bank deposits) and monthly living expenses (with receipts).
The IRS can set limits on your expenses. For example, if your car payment is $1,200 a month, the IRS will limit it to $497.
How To Request CNC Status
Don’t Ignore Your Tax Liability
Details You Need to Know About CNC Status
- The IRS will take any refunds in future years until you pay off the tax bill.
- The IRS will usually file a federal tax lien if you owe more than $10,000.
- CNC status does nothing to reduce or eliminate your tax liability.
- CNC status may not be forever. After you get CNC status, the IRS will review your financial situation every year to see if you can afford to pay your taxes again.
- If your financial situation changes, the IRS may remove you from CNC status and ask for new terms.
- The IRS will analyze the income on your tax return or on information statements like Form W-2, 1099, etc., if you haven’t filed.
- If your income is more than the living expenses you provided when you originally got your CNC status, you’ll likely need to start making payments to the IRS unless you have added more necessary living expenses.
- The IRS sends a notice to you if it wants you to provide more current financial information about your CNC status.
- If your situation stays the same, the IRS will likely “write off” your taxes, penalties, and interest owed after 10 years. This rule is called the collection statute of limitations. At the end of 10 years, the IRS can no longer collect unless you have extended the collection statute by some action (filed an offer in compromise, left the country, and several other reasons).
If You’re Experiencing A Financial Hardship As A Result Of Covid 19, Consider CNC Status.
You may even want to consider an IRS offer in compromise if your circumstances allow you to settle your tax debt with the IRS.
Read more at: Tax Times blog