Owing an outstanding tax debt to the IRS can be stressful, to stay the least. The letters can arrive continuously and the phone calls may never seem to stop. You may have received an intent to levy notice. You may also be having your wages garnished. If you are going through any of this, then you may be desperate for some back tax relief. Currently Not Collectible Status (CNC) may provide you with just what you are looking for.
What is Currently Not Collectible (CNC) Status?
CNC status provides taxpayers who owe back taxes with relief from active collection efforts from the IRS. This means that those granted CNC status will have levies against them temporarily stopped. Any threatening letters or collection enforcement measures will also stop once CNC status is granted.
The IRS will grant a taxpayer CNC status if he or she can show financial hardship which prevents them from making payments on outstanding tax debt after covering cost of living expenses. This means that the taxpayer must show a serious economic disadvantage. Having to pay off the outstanding tax burden must prove to be more than a minor inconvenience.
In order to calculate whether a taxpayer is experiencing economic hardship at a level that would merit granting CNC status, the person’s “total positive income” will be tallied. Total positive income will include any positive value reflected in the income section on a tax return. This includes:
- Real estate income
- Other sources of income
After reaching a value for your total positive income, it will be compared to the national and local living expenses which will be deducted from the total positive income. These deductions for living expenses will include things such as the cost of food, clothing, out of pocket healthcare costs, as well as housing, utilities, and transportation costs.
Establishing your total positive income and deducting eligible expenses will determine your net disposable income. This is the income that could be spent on something like tax payments. If the IRS determines that you have little to no disposable income to pay off a tax debt, they might change your account status to non-collectible.
Once placed in CNC status, the IRS is essentially prevented from continuing collection efforts. CNC means a stop to wage garnishment and other collection efforts such as calls and letters. It is very important to note, however, that CNC status does not mean that your tax debt goes away. You still very much will owe the IRS the back taxes, but will not be required to pay until your financial situation improves. The IRS will periodically reevaluate your financial status, including your ability to pay outstanding tax liabilities. This means that the IRS will monitor your tax returns every year to watch for an increase in your income.
If you are looking for relief from tax collection efforts, the trusted attorneys at Regal Tax & Law Group, P.C. are here to help. Let us explore your potential options such as CNC status. Contact us today.