IRS Currently Not Collectible Status
If you cannot afford to make monthly payments to the IRS, I can negotiate to have your accounts placed into “currently not collectible” status.
Currently not collectible status means that the IRS acknowledges that you are currently experiencing a financial hardship, and they are going to move you out of collections into a “hardship” status until things improve.
How Long Will I Remain In CNC Status?
By law, you are guaranteed to remain in currently not collectible status for at least one year. After one year has passed, the IRS computer systems will begin monitoring your annual tax return filings.
Once you file a tax return that reports an increase in income beyond what you were making when you were first placed into currently not collectible status, the computer will move you back into collections.
Once this happens, we will need to call Collections and make new arrangements. It is possible that we can call Collections and get you placed right back into Currently Not Collectible if you are still unable to make monthly payments to them.
If your income generally stays the same, it is possible to stay in this status forever, at least until the statute of limitations expires. Once that happens your debt is forgiven, and you are free to move on with your life.
How Do I Negotiate to Be Placed Into This Status?
The process is generally the same as negotiating a payment plan — think of this as negotiating a payment plan for $0 per month.
There are some additional steps that the IRS will generally make you take. For example, if you have equity in your home they may require that you prove that you cannot get a home loan to access that equity. If you have money in a retirement account, they may make you prove that you cannot access the money.
Is This a Long Term Strategy?
Generally, I consider being placed in CNC status as a temporary fix. The debt doesn’t go away, it actually continues to grow because penalties and interest are still accruing.
If you qualify for CNC status, you may also qualify for an Offer in Compromise.
This is not always true though — CNC status is based primarily on monthly income and you can usually get the IRS to ignore equity in your assets (real estate, retirement accounts etc) by just proving that you cannot get to the money.
In an Offer in Compromise, however, you can almost never get the IRS to ignore equity that is in your assets — even if you cannot actually get to the money, they add it into their settlement calculation.
If I can get you into currently not collectible status, we should also look into filing an Offer in Compromise. If I don’t think you qualify, I generally recommend staying in CNC status for as long as possible — especially if the statute of limitations is getting close to expiring.
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Whatever your tax needs are big or small I invite you to call me at (303) 376-6267, complete the “Contact Me” form below, or email me at john@cotaxattorney.com