Resolving Tax Debt: A Guide to Setting Up Currently Not Collectible Status (CNC) with the IRS
Dealing with tax debt can be overwhelming, but there are options available to provide relief and assistance for taxpayers facing financial difficulties. One such option is obtaining Currently Not Collectible (CNC) status with the Internal Revenue Service (IRS). CNC status temporarily suspends IRS collection activities for taxpayers who are unable to pay their tax debts due to financial hardship. In this blog, we’ll explore the process of setting up CNC status with the IRS and provide practical tips for success.
Understanding Currently Not Collectible (CNC) Status
Currently Not Collectible (CNC) status is a designation the IRS grants to taxpayers who demonstrate that they are experiencing financial hardship and are unable to pay their tax debts. When a taxpayer is deemed Currently Not Collectible, the IRS temporarily suspends collection activities, such as wage garnishment, bank levies, and property liens. While the tax debt remains, the IRS agrees not to pursue collection efforts until the taxpayer’s financial situation improves.
Steps to Successfully Set Up CNC Status
1. Assess Your Financial Situation
Before pursuing CNC status with the IRS, assess your financial situation to determine if you meet the criteria for financial hardship. Gather documentation of your income, expenses, assets, and liabilities to support your case. Be prepared to provide detailed information about your financial circumstances to the IRS.
2. Contact the IRS
Reach out to the IRS to discuss your options for obtaining CNC status. You can contact the IRS by phone, mail, or through the Online Payment Agreement tool on the IRS website. Be prepared to provide your taxpayer identification number, the amount you owe, and details of your financial hardship.
3. Submit Form 433-F or Form 433-A
The IRS typically requires taxpayers seeking CNC status to submit either Form 433-F (Collection Information Statement) or Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). These forms provide detailed information about your financial situation, including income, expenses, assets, and liabilities. Complete the appropriate form accurately and thoroughly to support your request for CNC status.
4. Provide Supporting Documentation
In addition to Form 433-F or Form 433-A, the IRS may require you to provide supporting documentation to verify your financial hardship claims. This may include recent pay stubs, bank statements, tax returns, and other relevant financial records. Be prepared to submit all requested documentation promptly and accurately to support your case.
5. Review and Sign Agreement
If the IRS approves your request for CNC status, carefully review the terms and conditions outlined in the agreement. Ensure that you understand your obligations, including the temporary suspension of collection activities and the potential consequences of defaulting on the agreement. Sign the agreement and return it to the IRS as instructed.
6. Maintain Communication with the IRS
While in CNC status, it’s essential to maintain communication with the IRS and keep them informed of any changes in your financial situation. If your financial circumstances improve, you may become eligible to resume payments or enter into a different payment arrangement with the IRS. Conversely, if your financial situation worsens, you may need to provide updated information to support your continued CNC status.
Benefits of Currently Not Collectible (CNC) Status
- Temporary Relief: CNC status provides immediate relief from IRS collection activities, giving taxpayers time to address their financial hardships without the pressure of ongoing collection efforts.
- Protection from Collection Actions: While in CNC status, taxpayers are protected from wage garnishment, bank levies, and property liens by the IRS.
- Time to Improve Financial Situation: CNC status allows taxpayers to focus on improving their financial situation without the added stress of IRS collection activities, such as finding employment, reducing expenses, or seeking additional sources of income.
Conclusion
Setting up Currently Not Collectible (CNC) status with the IRS can provide much-needed relief for taxpayers facing financial hardships. By following these steps and providing accurate and thorough information to support your case, you can successfully obtain CNC status and temporarily suspend IRS collection activities. If you’re struggling with tax debt and financial hardship, don’t hesitate to explore the option of CNC status and seek guidance from tax professionals or the IRS to find the best solution for your situation.
