Monday, December 8, 2008

Terms Of Currently Not Collectible Status

I had a client email me ask me what Currently Not Collectible actually meant. So many taxpayers with outstanding tax liability have no idea that IRS can stop collections on your liability. However, CNC Status is not as easy to obtain as it used to be. The IRS is cracking down on the qualifications for CNC. The IRS's decision is predicated on the following requirements:

1. The IRS has to deem you as having no MDI (Monthly Disposable Income) which is your income less your monthly expenses,

2. No liquid assets to pay yout liability

3. Automatic CNC will be approved if the taxpayer is deceased with no collection potential from the deceadent estate or no collection potential for estate taxes

4. CNC approved a corporation or LLC is classified as a partnership or association taxable as a corporation remains in business and is current but is unable to pay back taxes.

Also when a corporate income tax liability owed by a financial institution certified as insolvent by the Officer of the Controller of the Currency or the Office of Thrift Supervision

5. A taxoayer is deployed to a combat zone

6. When collection of the liabiltiy would create an undue hardship for taxpayers by leaving them unable to meet necessary living expenses.

According to the IRS approval, they will cease payments of taxes for at least 112-18 months, when they will review your current financial stability for re-approval of CNC or the induction back into collections for ability to pay (closing code).

When the time comes to re-evaluate your case, the IRS will default your CNC status if they can't locate you, and could possibly levy you. The IRS will annually send you a statement balance (CP 89) around 12-18 for case review. They basically want to see if anything has changed about your current financial state.

A tax lien will always be filed with CNC status.

1 comment:

Anonymous said...

Thank you for explaining the actual terms the IRS looks for.