If you are in financial straits and cannot pay your tax debt, the IRS may agree to cease collection activity until your finances improve. In this time, you can get back on solid financial ground without worrying that the IRS will seize your assets.
Work with an IRS collections attorney or Enrolled Agent at Pontius Tax Law if you are seeking Currently Not Collectable status in Bethesda. They can ensure you understand your obligations if the IRS grants you this temporary reprieve.
Understanding the CNC Option
Both businesses and individuals may seek Currently Not Collectible (CNC) status. If granted, the IRS agrees to suspend efforts to collect your tax debt as long as the CNC remains in effect. However, the IRS reserves its right to resume collection activity if your status changes.
Even though the IRS agrees to temporarily cease collection activity, penalties and interest continue to accrue on the unpaid balance. You will end up owing a much greater sum when CNC status is eventually removed.
Despite the accrual of penalties and interest, a Bethesda attorney could recommend pursuing CNC status because it does not impact the ten-year statute of limitations on IRS tax debt collection. The IRS must write off the debt once the statute of limitations expires. This is in contrast to other methods of resolving tax debt which may pause the statute of limitations and preserve the IRS’s ability to take collection action for a longer period of time.
How Does the IRS Determine Eligibility?
You must have filed all tax returns to be eligible to apply for CNC status in Bethesda. If you have unfiled returns, we can work with you to file late returns before applying for CNC status.
Individual taxpayers apply for the program using Form 433-F, Collection Information Statement or Form 433-A depending on where your case is being worked within the IRS. Businesses applying for CNC status must submit Form 433-B. The IRS requires substantial supporting documentation including:
- Proof of earned income like pay stubs, and profit and loss statements
- Copies of lease and rent receipts or mortgage statements for primary residence
- Three months of statements for checking, saving, and investment accounts
- Credit card statements
- Title, deed, mortgage balance, and market value of any real estate owned
- Title, vehicle registration, market value, and loan balance on any vehicles owned
- Receipts for monthly expenses like groceries, gas, insurance, and utilities
If the IRS grants you CNC status, it has the right to request additional information periodically, and in most cases, it uses information from your annual returns to determine whether you still qualify. If your financial situation improves, the IRS may remove your CNC status and expect you to arrange to pay your debt in full or in installments.
Taxpayer Obligations Under the Program
You must acknowledge your debt to be granted this status. A Bethesda taxpayer cannot dispute the amount of tax owing after obtaining CNC status.
Taxpayers must file all subsequent returns on time and pay any taxes owed; businesses must continue to make their quarterly tax deposits and timely file and pay all new tax obligations in full. If you are owed a tax refund, the IRS has a right to seize it and apply it to your tax debt.
You must notify the IRS if you acquire valuable assets or experience a substantial improvement in your financial condition while your CNC status is active, and our Bethesda attorney can advise you about whether a given situation requires disclosure.
Talk to a Bethesda Attorney About CNC Status Now
Currently Not Collectable status gives taxpayers in Bethesda some time to regain financial stability but does not erase or reduce your debt. Contact Pontius Tax Law to discuss whether you qualify. Our team includes Enrolled Agents and former IRS Revenue Officers, so we have a first-hand understanding of the IRS process for granting this relief. Schedule a consult today.