There are times where you agree you owe the IRS, but you can’t pay due to your current financial situation. If the IRS agrees you can’t both pay your taxes and your reasonable living expenses, it may place your account in Currently Not Collectible (CNC) status.
While your account is in CNC status, the IRS generally won't try to collect from you. For example: It won’t levy your assets and income. However, the IRS will still assess interest and penalties to your account, and keep your refunds and apply them to your debt. You'll also continue to receive an annual bill from the IRS because that is required under the law.
Before the IRS will place your account in CNC status, it may ask you to file any past due tax returns.
If you request CNC status, the IRS may ask you to provide financial information, including your income and expenses, and whether you can sell any assets or get a loan.
During the time the IRS may collect the balance you owe, it may review your income annually to see if your financial situation improved.
Generally, the IRS can attempt to collect your taxes up to ten years from the date they were assessed, though the ten-year period is tolled in certain circumstances. The time the suspension is in effect will extend the time the IRS has to collect the tax.
Because the IRS won’t suspend interest and penalty charges, you may want to consider other possible payment options within your means before asking the IRS to place your account in CNC status.
TheCPATaxProblemSolver specializes in a great array of tax debt resolutions, including dealing with currently not collectible (CNC) accounts. 5 IRS Tax Relief Programs
UNDERSTANDING CURRENTLY NOT COLLECTIBLE
CNC indicates that a taxpayer has no ability to pay his or her tax debt. That taxpayer must demonstrate that they are in a state of severe financial hardship. They can’t even liquidate assets or make monthly payments to clear their back taxes. In these circumstances, the IRS declares that individual’s account as currently not collectible.
As a taxpayer, you are required to submit substantiating documentation and detailed financial forms to the IRS agent for a thorough review. Once the IRS officially declares that you are currently not collectible, they must stop all collection activities, including wage garnishments and bank levies. Next, the IRS is required to send annual statements to the taxpayer, which remind him or her about the amount of tax still owed. However, it is not viewed as a bill.
If the IRS cannot collect the tax within a 10-year statutory period, the debts automatically expire. Owe taxes? Understanding IRS Collection Efforts
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