Currently Not Collectible CNC Hardship Guide

Understanding Currently Not Collectible (CNC) Status

The IRS Currently Not Collectible (CNC) status is a provision that temporarily suspends IRS collection activities due to financial hardship. This status is beneficial for taxpayers facing significant financial difficulties, allowing them some respite from tax debt collections. However, achieving CNC status requires meeting specific criteria and understanding its implications.

What is CNC Status?

When a taxpayer is deemed Currently Not Collectible, the IRS recognizes that the individual cannot pay their tax debt without causing undue hardship. As a result, the IRS halts collection efforts, including levies and liens. It's important to note that CNC status is not permanent and requires periodic review.

Eligibility Criteria for CNC Status

To qualify for CNC status, taxpayers must demonstrate their inability to pay via Form 433-A (for individuals) or 433-B (for businesses). Key factors the IRS considers include:

• Income versus Necessary Living Expenses: The IRS evaluates if a taxpayer's income is sufficient to cover basic living expenses, based on the Collection Financial Standards.
• Asset Liquidity: Taxpayers must show that liquidating assets to pay the debt would cause financial distress.
• Medical Conditions: Significant health issues that impede earning capacity can be a valid reason for CNC status.

Steps to Obtain CNC Status

1. Gather Financial Documentation

This includes all relevant income statements, expense documentation, and asset information. The IRS requires a thorough overview of your financial situation to determine eligibility.

2. Complete Required IRS Forms

Individuals must fill out Form 433-A, and businesses should complete Form 433-B. These forms provide detailed information about your financial condition, including monthly income, expenses, and assets.

3. Contact the IRS

Once your forms are prepared, contact the IRS to discuss your financial situation. You may be required to provide additional documentation or clarification.

4. Wait for IRS Review

The IRS will review your case and determine if CNC status is appropriate. This process can take several weeks, so patience is key.

Impact of CNC Status

Temporary Relief: While CNC status offers temporary relief from tax collections, it doesn’t eliminate the tax debt. Interest and penalties will continue to accrue.

Periodic Review: The IRS will periodically review your financial situation to determine if CNC status remains applicable. This means reapplying and providing updated financial information when requested.

Potential Long-Term Solutions: CNC status provides breathing room to seek other resolutions, such as an Offer in Compromise (OIC) or installment agreement.

FAQs on CNC Status

• Will CNC Status Affect My Credit Score?

  No, the IRS does not report to credit bureaus, so CNC status alone does not impact your credit score.

• Can the IRS Reverse CNC Status?

  Yes, if your financial situation improves, the IRS may annul CNC status and resume collections.

• Do I Still Need to File Tax Returns?

  Yes, taxpayers must continue to file tax returns even if they are in CNC status. Failing to file can jeopardize current and future CNC eligibility.

• Is There a Fee for CNC Status?

  No, the IRS does not charge a fee to apply for CNC status.

• Can I Appeal if CNC Status is Denied?

  Yes, if denied, you can appeal the decision and provide further financial documentation to support your case.

Actionable Steps

If you believe you qualify for CNC status, take the following steps:

• Review the IRS Collection Financial Standards to gauge initial eligibility.
• Gather necessary financial documentation, including income and expense reports.
• Complete Form 433-A or 433-B, ensuring all information is accurate and comprehensive.
• Contact the IRS to discuss your situation and submit documentation as required.

For professional assistance, visit our dashboard to connect with tax experts who can guide you through the CNC application process and explore other tax relief options.