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Currently not Collectible - IRS Hardship






The IRS offers hardship status for those who cannot pay their tax debt. This is called Currently not Collectible. To qualify for this status, you need to prove that you are unable to pay your tax debt because of financial hardship.


To qualify for Currently Not Collectible (CNC) status, your filing requirements must be met and your tax debt must be less than $50,000. The IRS will consider the following factors when determining if you qualify:

1. You owe less than $50,000 in combined federal income taxes and penalties (including interest).

2. You have no outstanding collection actions against you. This includes any legal action taken by the government to collect a debt from you or garnish your wages or bank account.

3. It also includes levies on your property or bank accounts, liens on property owned by you or filed against property belonging to someone else that was sold at auction under a judgment against you, and seizures of property belonging to others that were sold at auction under a judgment against you.


You have experienced "economic hardship" due to circumstances beyond your control that prevented payment during the last three years of the five-year period ending on the date of application for currently not collectible status (except if those circumstances were caused by fraud). Economic hardship includes losses



Understanding Currently Not Collectible (IRS Hardship) Status

Section of IRS Code explains the different situations in which an account may be moved to CNC status. For example, CNC status may be granted when:

A. Collection of taxes would create “a hardship for taxpayers” that leaves them unable to meet the basic cost of living expenses;

B. When an individual dies and there is no collection potential from their estate;

C. When a taxpayer (or their assets) cannot be located; or

D. When a taxpayer cannot be contacted, even though the location is known.



If you are unable to pay your tax debt, the IRS has a program called Currently Not Collectible (CNC). The CNC status is available to taxpayers who cannot pay their entire tax debt because of financial hardship.


The IRS issues a Currently Not Collectible (CNC) letter to inform you that they have approved your request for CNC status. The letter explains how long the CNC period will last and what you need to do while it is in effect.


Here are some things to know about CNC:

It can help with credit scores and improve your ability to get loans or credit cards.

It doesn't eliminate penalties or interest on your debt but it does stop collection actions by the IRS for six months at a time. If you qualify for CNC status again in the future, it will continue where it left off the previous time.


How to Obtain CNC Status


As stated above, CNC status can be an essential part of financial health for those who have a tax liability but are unable to pay it. An experienced tax attorney can help to guide you through the steps of applying for CNC status, which include proving that you do not have any assets to pay your tax burden.


To prove this, you must fill out and file several forms, including Form 433-A. This is a highly comprehensive financial form that should be filled out with a knowledgeable tax attorney. You will also need to include a copy of your tax return, proof of living expenses (including healthcare and transportation), and more.

The status of Currently Not Collectible (IRS Hardship) means precisely what you think. When it has been proven to the IRS that you are unable to pay on your tax liability or the assessed penalties and interest under the following circumstances:


a. Personal income covers only your essential living costs with no leftover money that the IRS can take

b. Lack of valuable assets subject to levying


Note that the IRS is not allowed to seize an asset that has less than 20 percent equity in the item or if the expense involved in seizing and selling is higher than the value of the equity

Although the idea of having nothing worth taking is not the ideal position to be in, it can help with dealing with the IRS. If your tax liability is considered uncollectible, collection activities by the IRS will be halted. While the IRS will be unable to collect against you, interest and penalties will continue to accrue on your tax debt.


To learn more about the tax relief program known as Currently not Collectible (CNC) status, contact Flat Fee Tax Relief today.