Many responsible Americans file their taxes on time, but simply cannot afford to pay what they owe. If you count yourself among these unfortunate individuals, relief may be available in the form of ‘Currently Not Collectible’ (CNC) designation. If your account is deemed not collectible, you could be spared many of the negative consequences that typically accompany tax noncompliance. CNC isn’t always an ideal option; it won’t spare you from interest and late fees, and could even result in significant spending limitations.
The Benefits of Being Deemed ‘Not Collectible’
Sometimes, all you need to get back on financial track is a break from all of the notices and threats. If you qualify for CNC status, such a break is possible — at least temporarily. CNC exempts you from garnished wages, bank account levies, and a whole host of collection actions that the IRS typically takes to resolve delinquent accounts. You’ll by no means be free of your burden to pay, but the urgency of your situation will lessen somewhat so you can focus on getting your financial affairs in order.
When Currently Not Collectible Status Causes Problems
While CNC can save you a great deal of financial anxiety, it comes with its own fair share of headaches. Chief among these: sudden limitations imposed on your budget by the IRS. Additionally, CNC status allows the IRS to continue assessing interest and penalties. These expenses can add up quickly, making it difficult for you to dig yourself out of debt.
In addition to imposing financial restrictions, the IRS will apply future refunds to your tax bill. Keep in mind that CNC status will not last forever; your tax situation will be reviewed annually until the IRS determines that you are once again capable of paying up.
Lastly, the IRS will file a Notice of Federal Tax Lien if they haven’t done so already, once CNC is negotiated. A Federal Tax Lien will negatively impact your credit, hinder your ability to qualify for a loan or refinance, as well as limit your ability to sell your home (as the proceeds if sold, will go to the IRS lien).
As you struggle with a difficult tax situation, you can take solace in knowing that Highland Tax Resolution is here to help. Call 720-398-6088 today to learn more.