What is CNC? Will Your Tax Case Qualify?

What is CNC? Will Your Tax Case Qualify?

You know that you owe back taxes, but due to your current situation, you cannot afford to pay your reasonable living expenses along with extra money toward taxes. The Internal Revenue Service might assess your financial situation and agree with you, classifying your account as Currently Not Collectible. This means the IRS will not actively attempt to collect any back taxes that you owe.

Qualifying for CNC Status

Prior to qualifying, the IRS will request your financial information, including wages, assets and expenses. They will ask if you can obtain a loan from family or friends or from a financial institution or if selling assets is an option.

If you decide to apply for CNC status, you should take the following steps:

  1. Keep filing all of your returns so that you do not accrue late filing fees.
  2. Organize all relevant documents, including income verification, monthly bills, debts and loans.
  3. Write a letter to the IRS, seeking CNC status. Include the paperwork that you collected along with a copy of any notices that you received.

What to Do if the IRS Denies Your Request

Even if the IRS denies your request for CNC, you can do the following:

  1. Ask to speak with the IRS Collection Manager. Employees must give you the name and contact information of that person.
  2. Retain the services of a qualified professional, such as the Highland Tax Group, to assist you.
  3. File an appeal according to IRS Publication 1660.
  4. Speak with the Taxpayer Advocate Service, especially if you are facing an immediate adverse action, such as an eviction or loss of power due to non-payment.

Disadvantages of CNC Status

However, even if you are approved for CNC status, you will still need to pay penalties and interest on your tax bill. The IRS might keep any refunds that you are due and put them toward your debt. In addition, you will likely first need to file any missing tax returns from previous years. During this time, it will continue to look at your finances each year to review your situation in an attempt to collect your taxes, and it can take up to 10 years to do so. Lastly, the IRS may file a tax lien if one has not already been filed.

Help from Our Seasoned Tax Specialists

The Highland Tax Group helps clients with CNCs from start to finish, from drafting a letter to organizing your case as you seek a payment reduction. Contact us at 720-398-6088 for a complete review of your tax situation so that you can begin the process of relieving your tax burden.