Tax Relief FAQ: How Does “Currently Not Collectible” Status Affect IRS Collection of Back Taxes?

Owing back taxes and interest to the IRS is a surprisingly common problem: thousands of Americans feel the burden of it every year. Therefore it is important to take the steps to resolve your IRS problems now. The worst thing you can do is ignore letters from the IRS, hoping your troubles will go away. They will not do so on their own – you must take the appropriate steps! If you have back taxes to settle, it’s important to know your options for dealing with the IRS so you can get the income tax relief you need.

If you owe back taxes but are not able to pay anything at all as a monthly installment, or you can’t get to the equity in your assets (if you have any) one option to consider for obtaining tax relief is having your account declared “currently not collectible” (CNC) by the IRS. The IRS often refers to this as a “hardship” status and the taxpayer must present incontrovertible evidence that he or she has no ability to pay the back taxes owed at the present time.

This evidence is submitted through IRS Form 433-F, (or Form 433-A if the debt is considered substantial) the Collection Information Statement (CIS), which details income, assets, and expense information. Any taxpayer who contemplates this tax relief option should immediately seek tax help from a tax attorney or Certified Tax Resolution Expert who is best able to advise whether this is the proper option and, if so, can expertly prepare the CIS.

CNC status is considered on an individual basis. In the right circumstances, CNC can indeed provide tax relief breathing room. For example, even if the CIS does show that there are assets or income that potentially could be levied, the IRS may exercise “reasonable forbearance” if the collection of those assets deprives a taxpayer from essential living expenses. Factors such as health and age may also be considered.

While this declaration does temporarily suspend collection action by the IRS, it is important to understand that it does not forgive the debt. The IRS may still file a tax lien on future assets before it declares any account CNC, and interest and late payment penalties may still accrue. CNC tax relief can last the full 10-year term before the Collection Statute Expiration Date, but the IRS can resume collection action any time before the statutory expiration date. And, if a taxpayer can reasonably pay a minimum of $25 per month, the IRS will require the taxpayer to enter into an installment plan before it will place the account in CNC.

If the IRS declares an account CNC, the taxpayer will receive a Status Code 530, and the decision will be documented on Form 53 (Report of Currently Not Collectible Taxes). If the account is still deemed CNC at the statutory expiration, the IRS cannot further pursue tax debt payment. Remember, you don’t have a CNC agreement until the proper codes (530) are input into your tax transcript by the IRS. The average lay person does not have this knowledge and thinks he/she has a CNC agreement and then unknowingly gets levied. This is why you require expert tax representation by a qualified professional. A Certified Tax Resolution Specialist or specialized tax attorney is best positioned to step in, contact the IRS on your behalf, and work through your individual tax relief plan.

Additional Information for Tax Relief:

Settling Back Taxes and IRS Problems
Get expert tax help resolving your tax debt for a fraction of what you owe to permanently settle your back taxes and IRS problems.

Tax Relief Glossary
Tax help glossary with common income tax relief terms to help you settle your IRS debt and permanently achieve your tax resolution.

IRS Tax Help Articles
Helpful articles for resolving IRS debt with IRS tax relief options like offer in compromise, IRS payment plans, and IRS audit resolution.

Tax Resolution University Blog
Expert tax relief resource to help you permanently resolve all back taxes and IRS problems.

For more answers to your tax relief questions, check out our Tax Relief FAQs page.

Tax Resolution Services is the only national tax resolution firm comprised of experienced tax attorneys, CPAs, and Certified Tax Resolution Specialists certified by the American Society of Tax Problem Solvers (ASTPS). This is what makes us uniquely qualified to successfully solve IRS problems day in and day out.  Call 866-477-7762 or visit our website at www.taxresolution.com to schedule a FREE consultation today.