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The IRS’s Currently Not Collectible Status

Posted by Brandon Keim | Jan 27, 2021 | 0 Comments

If you're financially unable to pay your taxes, you may qualify for the IRS to assign your account to “currently not collectible” (CNC) status. CNC is the IRS status assigned to debts that it deems the taxpayer unable to pay, deferring you from wage garnishment or levies on your bank accounts.

What Happens in CNC Status?

When in CNC status, the IRS will stop all collection efforts. You can defer making payments until you're financially able to do so, but your tax debt doesn't go away when you're in CNC status. Your debt will continue to accrue penalties and interest, which can significantly increase your tax debt.

While you're in CNC status, the IRS won't garnish your paychecks, but they will withhold any tax refunds you may be due each year. The IRS may also place a lien on your home. If you sell your home, any additional money from the sale will go towards the debt you owe the IRS. The lien on your home will also show up on your credit report, letting any potential creditors know that you have an unpaid tax debt.

Qualifying for CNC Status

To qualify for CNC status, making tax payments must cause you significant hardship. “Significant hardship” means that you would have to do without some of the necessities of life to make payments on your tax debt. In determining if you qualify for CNC status, the IRS will also consider:

• How much time you have left on the ten-year statute of limitations on your tax debt,
• Your income and whether you make less than $84,000 a year,
• Whether your living expenses fall within IRS guidelines,
• How much money you have left at the end of the month after paying basic living expenses,
• Whether you're unemployed, and
• Whether you lived on a fixed income from social security, disability, or unemployment.

If the IRS can't collect your debt after ten years, the debt will expire. CNC status isn't a long-term debt relief solution, however. If you are in CNC status, negotiating your debt to a lower amount can sometimes be successful through an offer in compromise. At the very least, it shows that you are serious about attempting to pay your tax debt.

If you're facing an overwhelming tax obligation, you need experienced legal advice. Negotiating with the IRS can be overwhelming, and you don't have to go through this process alone. Call Senior Partner, Tax Controversy Attorney, Brandon A. Keim at (602) 200-7399 today to discuss your options.

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.

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