Currently Not Collectible (CNC) status can be a lifeline for taxpayers who are unable to pay their taxes. When the IRS grants CNC status, it means that all collection activity against the taxpayer is put on hold until the taxpayer's financial situation improves. This article will explain how CNC status works and how it can help taxpayers.
Obtaining CNC status is a complicated process, and taxpayers should always work with a professional to handle their situation. The IRS evaluates each taxpayer’s financial information and takes into account any assets they have along with the amount owed to them in taxes. The agency looks at their monthly expenses as well, since they need to determine whether it’s possible for the taxpayer to make payments on their debt or not.
Based on this analysis, they will grant or deny CNC status. If granted, it means that the taxpayer can focus on rebuilding their finances instead of dealing with aggressive collection activities from the IRS. On the other hand, if CNC status is denied, then taxpayers must figure out another way to pay off their tax debts without sacrificing basic living expenses or essential household needs. Therefore, those who receive CNC status may find some relief from this difficult situation.
The IRS will grant you a currently not collectible status if you can prove that making any tax debt payments would suffer financially detrimental. You or your representative must contact the office and provide reasoning along with supporting paperwork like paycheck stubs, bank statements, or Collection Information Statements. If your only source of income is wages, they may be able to verify this information over Bufferthe phone instead.
Although unawareness is common, not all taxpayers who request it are granted this status. If you apply for economic hardship based on your actual income and expenses, It is important to remember that you may not qualify for the status. The IRS allows using a “standard” family living expense calculation to decide if you are eligible for CNC status. However, these standard living expenses are often much less than actual living expenses- even after being adjusted for family size and location. So although your bank statements or credit cards might show that you're struggling, from the IRS' perspective, you may not be in any financial difficulty.
There are several benefits to having your account placed in CNC status by the IRS.
The status of "Currently Not Collectible" (CNC) can offer a major reprieve for individuals struggling with unpaid taxes. Once a taxpayer is approved and placed in CNC status, the Internal Revenue Service (IRS) will no longer pursue the collection of the debt owed. However, it's important to understand that this status isn't forever; the IRS only suspends collection activities for a certain period.
How long does CNC status last? The short answer is, up to 10 years. Under federal law, income taxes have an expiration date after which they can no longer be collected by the IRS. In other words, there is a 10-year "statute of limitations" on income taxes. The statute of limitations defines the amount of time the IRS has to collect back taxes from a taxpayer. If a taxpayer is currently not collectible status, this timeline pauses, meaning that the debt expires automatically if the IRS is unable to collect within 10 years. For example, if you are granted CNC status in 2021 and remain in that state until 2031, your back taxes may expire naturally over those 10 years without you having to take any additional steps.
It's important to keep in mind that once you become eligible for tax relief programs such as Offer in Compromise or Installment Agreements, your CNC status may be canceled as these might be more viable options for resolving your tax debt. Therefore you should always seek professional advice before making any decisions about resolving your tax debt issue.
Overall, it helps to have an understanding of how long CNC lasts so that taxpayers can plan their finances accordingly and make informed decisions about their obligations and rights regarding unpaid taxes before it's too late. It pays to remember that since each case is unique and results will vary depending on individual circumstances and timelines, it is best to consult with a knowledgeable professional before proceeding with any plans related to tax relief or appeal. Ultimately understanding how long CNC lasts can help taxpayers avoid costly mistakes down the road when dealing with unpaid tax debts.
Currently Not Collectible (CNC) status can be a lifesaver for taxpayers who are unable to pay their taxes due to financial hardship. It allows them to put all collection activity on hold until they can make payments or their financial situation improves. It also halts any Statute of Limitations issues while they are in CNC status so they don’t have to worry about them becoming an issue later on down the line. If you find yourself unable to pay your taxes due to financial hardship, then speaking with a tax professional about applying for CNC status may be beneficial for you and your future finances.