The term “currently not collectible” (CNC) describes the status where the Internal Revenue Service (IRS) determines that you are not in a financial state to be able to pay your debt. This status is important since the IRS will not attempt to collect taxes from you while you are in CNC status. That means you avoid IRS collections including bank account levies, and wage garnishments.
Currently not collectible status does not erase your tax debt. Instead, it defers the payments until you are in a position where you can pay it back, such as through an Installment Agreement that could either fully or partially pay your balance due. An experienced IRS collections attorney could advise you on your options and assist you in securing currently not collectible status in Rockville.
It is not enough to qualify for currently not collectible status just because a taxpayer is facing financial challenges. To qualify, a taxpayer must have virtually no money or financial resources left each month after paying off their essential expenses, which includes things like groceries and rent. The IRS will require you to timely file and fully pay all future tax returns.
When the IRS determines you qualify for currently not collectible status, their collection efforts will cease. This means they will no longer pursue bank levies or wage garnishments, among other things. It is important to emphasize that this relief is not permanent. The IRS continually monitors a taxpayer’s file to determine if they remain qualified for currently not collectible status. If they determine during their annual review of the taxpayer’s financial position that a taxpayer is now capable of affording their tax bill, in full or by way of an installment agreement, they could remove this status and resume collection efforts.
Currently not collectible status might halt collection efforts but it will not provide taxpayers with permanent relief from their tax debts. What’s more, the fees and interest on the overdue tax will continue to accrue. This short-term relief can be helpful but taxpayers will need to work with a Rockville currently not collectible status lawyer to come up with a more long-term solution.
Not everyone who owes a tax debt qualifies for currently not collectible status. In fact, it is possible to face financial hardship without being classified as non-collectible. In order to qualify, a taxpayer must face “significant hardship” when attempting to pay their tax debts, which occurs when paying these taxes result in “serious privation.” In other words, a taxpayer would be forced to go without basic life necessities—food or housing, for example—if they instead paid the taxes they owe. This level of hardship goes beyond inconvenience.
The IRS will take different factors into account when deciding if a taxpayer qualifies for currently not collectible status. They will also determine if a taxpayer has any assets (such as real property or savings accounts) that can be liquidated in order to pay down the tax bill.
When applying currently not collectible status to a taxpayer in Rockville, the IRS will also consider a person’s employment history. If they are involuntarily unemployed and lack any substantial source of income, they could qualify for this status.
The length of time this status remains in effect depends on how long a taxpayer faces financial hardship. It is important to consult with a lawyer so there is a clear understanding of when this status takes effect and when collection efforts are likely to restart.
Currently not collectible status could be a valuable tool for you to address your tax issues in the short term. By securing this status, you might have enough time to build up your finances to a place where you can begin to pay off your tax debt.
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.