- April 4, 2018
- Posted by: ajain
- Category: Solutions
Currently not Collectible status or, CNC, is a way to defer payment of taxes. This is used for those who are in a state of financial hardship. The status is meant to be in place until the individual’s situation improves. For example, unemployed individuals often seek CNC status from the IRS.
To get the CNC status, you have to be able to prove to the IRS that you cannot afford to pay. This will start by documenting your finances. The IRS will typically look at your bank accounts for the funds needed to pay your taxes, assuming you will not need the funds to pay for necessary living expenses such as rent, food, or utilities.
If you do not have the assets to pay the debt in your accounts, the IRS will want to look at your monthly income and necessary living expenses. At this stage, the IRS is looking to see if you can afford to set up an installment agreement. At this point the IRS might require you to prove your monthly income and living expenses with the respective pay stubs and receipts. This stage has a little snag that most are unaware of. The IRS has the power to limit your expenses. For example, if you have to pay $1,500 towards your car payment, they might limit it to $500.
There are a handful of things you should keep in mind about the CNC status. The IRS will collect your refunds every year until the tax debt is paid off. If you owe more than $10,000, the IRS is likely to file a federal tax lien on you. The IRS will also assess your financial status every year, and when it decides you are able to support your tax debt and yourself, they will remove the status from you.