Understanding the Concept of Currently Not Collectible

At Brightside Tax Relief, we understand that facing financial hardship, particularly tax-related debt, could leave one feeling overwhelmed and uncertain. One area often misunderstood is the Internal Revenue Service’s Currently Not Collectible (CNC) status. This post aims to demystify this concept and provide a clear roadmap for those who find themselves struggling with tax-related issues.

The IRS categorizes a taxpayer’s account as “Currently Not Collectible” when it deems they do not have the funds available to pay their tax debt. In other words, this status signifies that the IRS has temporarily halted its collection activities. The halt will continue until the taxpayer’s financial situation improves.

This status is a viable solution for taxpayers dealing with significant financial hardship. It offers relief from IRS collection activities, making it an option worth exploring for anyone in dire straits. However, securing this status isn’t easy or guaranteed, hence the need for a well-informed approach and, if necessary, professional help.

Routine IRS Collection Activity VS Currently Not Collectible Status

When you owe tax debt, the IRS employs various measures to ensure you pay. These range from serving a tax lien — a claim made on your property — to issuing a tax levy, which involves the seizure of your property to fulfill the debt.

Now, imagine what it would be like if these activities ceased. Not because you’ve fully paid your debt, but because the IRS deems you unable to.

That’s what happens when you secure the Currently Not Collectible status. Tax liens remain in place, but the IRS stops other forms of active collection — things like wage garnishments or property levies. It’s a breather, albeit a temporary one, designed to provide some relief during challenging financial periods.

Is Currently Not Collectible Status a Free Pass?

The Currently Not Collectible status does offer relief, but it’s important to note that it’s no magic wand. First, the tax debt doesn’t disappear; instead, collection activity halts. Furthermore, interest and penalties continue to accrue on the owing balance.

Also, securing the CNC status doesn’t automatically mean that you’re exempt from filing your federal tax return. In fact, keeping up with your tax filings is a prerequisite to maintaining your CNC status.

Lastly, a change in your financial conditions can make the IRS revert to collection activities. Generally, the IRS reviews a CNC account annually and can remove the CNC status if they find the taxpayer’s situation has improved significantly.

Qualifying for Currently Not Collectible Status

The question of how to secure Currently Not Collectible status is generally dependent on one’s circumstances. Here are the key qualification steps:

Demonstrate Financial Hardship

The first step towards securing the CNC status is demonstrating to the IRS that after accounting for all necessary living expenses, you cannot afford to pay off your tax debt.

Comply with Tax Laws

Despite your financial circumstances, you must file all tax returns. An IRS requirement for CNC consideration is that the taxpayer must be in full compliance with all filing requirements.

Necessary Documentation

The IRS requires detailed documentation that details your financial status. This encompasses your income — from all sources —, all living expenses, and all owned assets.

Consider a Professional Tax Relief Company

Successfully obtaining CNC status usually involves a lot of bureaucracy. Having legal representation, like the experts at Brightside Tax Relief, can prove beneficial during this process. Our team has the knowledge and experience to guide you, ensuring that nothing slips through the cracks.

In conclusion, securing Currently Not Collectible status could bring immediate financial relief and a needed break from collection activities. However, given the IRS’s exacting requirements, it is fundamental to approach the process with full understanding and, ideally, with the assistance of a reputable tax relief company. For more information on this topic, visit the IRS website.