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What is CNC Status? LifeBack Tax
Taxpayers who owe federal back taxes and are struggling to cover their living expenses may contact the IRS to request that their account be placed in "currently not collectible" status. A designation of Currently Not Collectible (CNC) indicates that the Internal Revenue Service acknowledges a taxpayer's inability to pay their tax debt due to financial hardship, and is temporarily pausing collection efforts. CNC status may also be called "uncollectible" or "financial hardship" status.
To be identified as uncollectible, a taxpayer must first file any past due returns with the IRS. The taxpayer also needs to provide the IRS with financial information regarding their income, expenses, and assets through a Collection Information Statement form. Based on the information provided, the IRS reviews the taxpayer's financial situation and whether the taxpayer is able to make payments. If the IRS agrees that the taxpayer is unable to pay their tax debt, they identify the taxpayer's account as Currently Not Collectible.
When a taxpayer is designated as Currently Not Collectible, the IRS suspends collection actions toward the taxpayer, including phone calls, notice letters, threats of litigation, and administrative levies. Currently Not Collectible status protects struggling taxpayers from having their wages garnished or assets seized. However, CNC status does not settle or suspend the taxpayer's liability. Unpaid taxes continue to accumulate interest and late penalties while identified as Currently Not Collectible, resulting in a greater tax debt when the taxpayer's financial situation improves. Additionally, the IRS may file a notice of federal tax lien to protect their claim to the taxpayer's assets from other creditors. For these reasons, Currently Not Collectible status may be favorable for some taxpayers, and less so for others.
Just as tax debts continue to accumulate interest and late penalties, the IRS's 10-year statute of limitations also continues during Currently Not Collectible status. The IRS periodically reviews the financial circumstances of Currently Not Collectible taxpayers to determine if they are now able to make payments. Otherwise, the statute of limitations can expire while the taxpayer's account is still designated as Currently Not Collectible, effectively freeing the taxpayer from their tax debt.
If you are unable to pay federal tax debts due to financial hardship, we at Lifeback Tax Relief are here to assist you in your conflict with the IRS. If Currently Not Collectible status is right for your needs, we can assist you with gathering and organizing the financial information necessary to request the IRS for CNC status.
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