Currently Not Collectible (CNC)
Now we get to one of the biggest tools in our tax relief toolbox. Essentially, the IRS has 10 years to collect the tax due (plus penalties and interest) for a specific year tax return. The 10-year clock starts from the date the tax return for the tax year in question was filed or April 15 of the following year, whichever is earliest.
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There are numerous reasons the IRS decides internally that an account is not collectible. These may be that the business is defunct, taxpayer cannot be located, the taxpayer has passed away and the IRS has received a death certificate.
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The main aspect of the CNC in which Tax Relief Assistance can help the taxpayer is under the hardship exceptions the IRS allows. Essentially, this is due to the taxpayer’s inability to make payments due to low income, loss of income, loss of spouse’s income or loss of business income. There are a substantial number of forms to complete with and for the taxpayer, starting with Forms 433-A/B to determine whether the taxpayer is unable to pay reasonable basic living expenses and has less than $10,000 in total assets.
The advantage to the taxpayer of obtaining CNC status is that they have an opportunity to provide for necessities of food, shelter, clothing, and car without having the IRS taking payments from their income that could make them homeless. In addition, the 10-year clock on collection by the IRS continues to run while the taxpayer is on CNC status. For instance, if a taxpayer was in his sixth year of collection, and was able to obtain CNC status, if his living situation did not improve he would survive the IRS collection period for that tax year in four years. One caveat is the IRS reassesses the taxpayer’s financial status every year he is on CNC status.
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