Some taxpayers encounter unexpected financial strain or hardship which can make it difficult or impossible to meet their tax obligations to the IRS. Tax collection efforts from the government could put an even bigger strain on that individual or business. The good news is that the IRS offers temporary relief to those who are unable to pay at the present time.
If you have a delinquent tax obligation to the IRS and cannot afford to pay it in your current financial state, you could apply for “currently not collectible” status. Also referred to as CNC status, this option prevents the IRS from pursuing collection efforts against you. A trustworthy tax attorney could discuss with you about how to qualify for currently not collectible status in Washington DC.
When the IRS grants currently not collectible status to a taxpayer, it means that they will not pursue collection efforts against that individual or business for as long as the status is in place. CNC status does not wipe out a taxpayer’s debt, and collection efforts will resume once the status is lifted.
This status also does not provide relief when it comes to fines, fees, or interest. These penalties continue to accrue on the total balance of the debt, even when the taxpayer has been deemed non-collectible by the IRS. This means it is essential to have a long-term plan when dealing with delinquent tax debt.
This status will not last forever. If a taxpayer’s financial situation improves, the status will be removed by the IRS. The IRS also conducts annual reviews of a taxpayer’s finances to determine if they are still facing severe financial hardship. Those who are found to no longer need relief will have their status removed. Taxpayers should work with their CNC lawyer in Washington DC to stay informed about when their finances are in good enough shape to warrant a change in status.
Not all taxpayers have the right to currently not collectible status. In order to qualify for CNC status, a taxpayer must establish that they are facing significant financial hardship. There is more to it than claiming a lack of resources or financial strain. The IRS will carefully investigate a person’s financial situation to determine if they truly qualify.
The IRS first looks at an applicant’s assets to see if they can resolve the debt, including financial assets like savings accounts or real estate that could be liquidated. Additionally, the IRS may require all past due returns be filed before granting CNC status. Consulting with a DC currently not collectible status lawyer is important so that a taxpayer understands if they are a good candidate for this designation.
Most taxpayers that seek CNC status do not have the assets necessary to pay off their debt. In those situations, the IRS will consider the amount of income they bring in each month. This is done through a combination of forms and a review of financial documents like pay stubs or account statements. The IRS will also take into account a taxpayer’s living expenses. If their monthly income is too low after living expenses are removed, the IRS could grant CNC status. It is worth keeping in mind that the IRS will limit the amount of necessary living expenses that a taxpayer claims.
If you are struggling to pay your outstanding tax debt, then currently not collectible status could put you in a good position to get back on your feet. There are pros and cons to this status that you should consider before applying. The team at Pontius Tax Law could advise you on what needs to happen for you to pursue currently not collectible status in Washington DC.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.