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CNC TAX RELIEF PROGRAM | IRS HARDSHIP PROGRAM

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If you watch cable television, you may have seen TV commercials and heard radio ads that discuss the IRS’ “Currently Not Collectible Tax Program” or “CNC Tax Program” or “Reduced Settlement” or “IRS Hardship Program”, which is “available for a limited time only.” In reality, there is no such “program” and there never has been. There is no “limited time” to apply.


The IRS places certain delinquent tax liability cases in a Currently not Collectible (CNC) status after its agents have determined that there is no ability to collect the taxes from the delinquent taxpayer.

The typical way this occurs is as follows. A taxpayer falls behind in filing tax returns, paying taxes, or both. The IRS will eventually attempt to collect the taxes and/or missing tax returns through its notice process, or via a home or office visit. If these attempts fail, the IRS will begin enforced collection action, which may include an IRS levy (garnishing salaries, seizing bank accounts), recording tax lien notices, or seizing other assets.

If the taxpayer can demonstrate that the payment of the back taxes, either through voluntary or enforced means, would create an “economic hardship” on the taxpayer, then the IRS will suspend collection activity by placing the taxpayer’s account into “CNC” status. This simply means that the IRS inputs a computer code on the taxpayer’s account that reflects the fact that the taxpayer cannot afford to pay the back taxes and meet his or her minimum monthly living expenses. It is important to recognize that what the taxpayer may view as a hardship and what the IRS may view as a financial hardship may be quite different.

In most cases, the IRS will not cease collection action until the taxpayer is in compliance. What that means is that the taxpayer must file any missing tax returns (usually the last 6 years) and must address any ongoing underpayment situation. As an example, if the reason the taxpayer owes delinquent taxes is that the taxpayer does not have sufficient income tax withheld from his or her paycheck, the IRS will not close the case as CNC (and will not suspend enforced collection action) until the taxpayer adjusts his or her withholding. Also, if the taxpayer is self-employed, the taxpayer will be required to become current with estimated tax payments prior to the IRS halting collection action and placing the case in CNC status.

Generally, detailed financial disclosure is required prior to the IRS closing a collection case as CNC. Usually, IRS Form 433-A or 433-F must be submitted along with documents that substantiate the taxpayer’s income, assets, and expenses. These documents may include pay stubs, mortgage statements, car loan statements, and so forth.

If the IRS allows a case to be suspended as CNC, the case will usually automatically be re-opened and returned to active collection status if the taxpayer fails to file a tax return in the future, accrues a new tax liability, or the taxpayer’s financial situation changes sufficiently to allow payments to be made against the back tax debt.

Also, in some cases, the IRS places a follow-up date on any particular case. When that date arrives, the IRS reactivates the case and sends it back to the collection. For example, the IRS may close a case CNC with a two-year follow-up. After two years, regardless of any other fact, the case is sent back to the collection.

CNC status usually lasts 12 to 18 months before the tax debt is re-activated or the CNC is continued. Be aware that CNC status is usually a temporary solution and not the pie in the sky tax relief. The tax is not forgiven or compromised, and interest and penalties continue to accrue.


Statute to Limitations


The IRS has 10 years to collect a tax debt starting with the date assessment. The "clock" continues to run when in Currently not Collectible status. It is quite possible that the IRS may never be able to collect the tax debt.


The tax professionals at Flat Fee Tax Relief recommend CNC for anyone who owes less than $10,000 because that is the cut-off for an Offer in Compromise. Sometimes, our tax pros will have a client placed into CNC status while we prepare their tax settlement.


This article is brought to you by Flat Fee Tax Relief. Our teams have been providing coast to coast IRS tax relief at a very affordable fee for more than a decade.


We are strategically located in Clearwater, Florida, and San Diego, California. Our teams "are ready to go" from 8 A.M. Eastern to 6 P.M. Pacific time. This gives our Tax Attorneys an extra 3 hours to contact the IRS. This comes in "mighty handy" when a client needs an IRS levy stopped in one day.



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