You owe the IRS a ton of money. You want to enter into a payment plan, but you are barely getting by. After paying all of your monthly bills, there is hardly enough money to put food on the table for your family. You think “I cannot afford another monthly bill, but I must do something about the taxes before the IRS starts taking my property.” No need to worry, you may qualify for Currently Not Collectible Status (CNC).
The IRS is well aware that there are times when a taxpayer owes a tax liability, but cannot pay due to their current financial situation. If the IRS determines that you cannot afford to pay your reasonable living expenses and your taxes, it may place your account in CNC status. The IRS will generally not try to collect the taxes from you while the account is in CNC status. However, if you are due a refund, the IRS will apply it to your tax debt. Also, depending on the amount, the IRS will still file a federal tax lien against you.
If a taxpayer request to be placed in CNC status, the taxpayer will be required to provide financial information to the IRS. The information includes all of your income and expenses, and whether you can either sell any assets or borrow against any assets. While in CNC status, the IRS may review your financial information annually to see if you still qualify. You will still receive annual notices regarding your tax liability, but you will not be required to make a payment.
Please keep in mind that while your account is in CNC status, interest and penalties will still accrue. Therefore, you may want to consider other options before requesting CNC status. If you need help determining the best option for your situation, please feel free to give us a call.