An IRS lien is a potential result of failure to pay federal taxes. It’s a claim against your property meant to settle a tax debt. If you’re facing a lien, you may wonder if putting your account into Currently Not Collectible (CNC) status will protect you.
What Is an IRS Lien?
An IRS lien is an option the IRS considers when you fail to pay your tax debt on time. With a lien, the IRS places a claim on your property, potentially leading to a levy.
A levy involves the IRS seizing your property to settle a tax debt. However, this isn’t the only potential consequence of a lien. For example, a lien may prevent you from getting credit because a lien is essentially a public notice of your debt.
What Is CNC Status?
It’s possible you don’t have the money necessary to pay back what you owe to the IRS. If you contact the IRS and explain the situation, the IRS may review your account and determine that it is currently impossible to collect what you owe from your account. This results in CNC status.
When an account is in CNC status, the IRS will pause all collection activities. CNC status doesn’t eliminate the debt. In addition, your debt will increase during the time you can’t pay due to interest and other such charges.
How Does CNC Status Affect IRS Liens?
CNC status protects you from IRS collection activities, which the IRS doesn’t typically engage in when it places a lien on your property. As such, getting CNC status for your account won’t necessarily protect you from an IRS tax lien. In some cases, such as when someone owes more than $10,000, the IRS may even require placing a lien on their property as a condition of granting CNC status.
Regardless, CNC status can be beneficial if you have tax debt you can’t currently pay. Our tax professionals at Highland Tax Group can help you determine if this option is right for you, and we can file the paperwork to set up CNC status for your account. Contact us today for more information.