Currently Not Collectible

What is CNC Status?

If a taxpayer finds themselves without savings, assets, investments, and with minimal income or retirement savings, they may qualify for Currently Non-Collectible (CNC) status. The IRS reviews this status over ten years, and if nothing changes, the IRS forgives the entire tax debt, including unpaid taxes, interest, and penalties.

CNC Requirements:

The IRS is persistent in collecting owed taxes, attempting to seize bank accounts and place liens on assets. However, Currently Non-Collectible status can be a solution for those unable to pay taxes. A taxpayer might qualify if:

  • They lack possessions for the IRS to levy taxes on.
  • Their income is insufficient to cover the owed taxes.
  • Their income is less than basic living costs.

What Happens During CNC Status?

While considered Currently Not Collectible, the taxpayer remains responsible for taxes and accrued interest. Interest accumulates throughout the ten-year CNC period. The IRS may request financial information, and if CNC status is lost before the ten years, the individual must pay back taxes, penalties, and interest.

The IRS monitors the taxpayer’s financial status during CNC, requiring the submission of an income tax return for comparison. Despite the IRS sending an annual bill, taxpayers must file income taxes each year, although no refunds are received; any potential refund is applied to the owed taxes.

While the IRS halts collection efforts under CNC, taxpayers should be cautious as a Revenue Officer may attempt to collect taxes owed before the ten-year statute of limitations expires.

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