Our office has received several phone calls about filing for currently not collectible (CNC) status recently, but most of those callers had little knowledge about what the program entails or their potential eligibility. Of course, we’re happy to help anyone who comes to us with tax problems, but we thought we would take the opportunity to define CNC and clarify some of the more common misconceptions about what the program does and who might qualify.
Keep reading to learn whether you might be eligible for CNC and find out how S.H. Block Tax Services can help you file for consideration.
What Is Currently Not Collectible Status?
Taxpayers who are financially unable to satisfy their outstanding tax debt may be eligible for CNC status, which is a program developed by the IRS to help those individuals repay their liability without the pressure of aggressive collection tactics. People enrolled in this program are not subject to negative items on their credit report and are temporarily exempt from wage garnishments and levies against their personal property.
Who Is Eligible for CNC Status?
When you file for CNC status, the IRS will consider several factors to determine if you have a financial hardship that prevents you from resolving your tax liability. Essentially, you may have to present documentation that proves you can’t pay your outstanding liability after paying “reasonable” monthly living expenses.
To calculate your “total positive income” (TPI), the IRS will first add all income from your most recent tax return, (including wages, interest, dividends, real estate income, distributions, and any profits made from self-employment), your wage documents sent to the IRS, or paystubs submitted. From there, the IRS will compare your income with local and national standard monthly living expenses, including:
- Rent and utilities: Amount based on the county in which you live
- Transportation to and from work: $189 for public transportation; $485 per motor vehicle
- Food, clothing, and hygiene: $639 for a single-person household; up to $1,650 for a household with four persons
- Out-of-pocket healthcare costs: $49 for individuals under 65; $117 for individuals over 65
The IRS adds up these monthly expenses and subtracts the resulting dollar figure from your monthly TPI to calculate your net disposable income. If satisfying your tax debt would create an economic hardship based on these calculations, there’s a reasonable chance you’ll qualify for CNC status.
Is CNC Status Permanent?
Although several prominent television and radio ads warn the CNC program is only available for a limited time, it has been around for years and doesn’t appear to be going anywhere soon. However, that doesn’t mean individuals admitted to the program can remain in CNC status forever, and the program may or may not absolve them of their tax debt — depending on whether the statute runs out or not.
The IRS continues to monitor the tax returns of each enrolled taxpayer throughout their involvement in the CNC program. If a taxpayer’s income increases to the point where the IRS believes their net disposable income is adequate to begin satisfying their tax debt, then the IRS may remove the taxpayer from CNC status and resume collection efforts.
Questions to Ask Before Pursuing CNC Status
CNC is helpful when used as a tool alongside other measures that can resolve past due taxes, but penalties and interest continue to accrue throughout enrollment in the program. So, unless the statute of limitations on your tax debt expires while you’re enrolled, you could potentially pay more in taxes if you take advantage of the CNC program.
CNC is not a permanent fix, and it doesn’t work for everyone. Moreover, only a select few qualify for the program. Depending on your financial circumstances, you should at least consider filing for CNC status, but before you do, answer the following questions:
- Will repaying your tax debt truly cause economic hardship?
- Can you afford your living expenses and a monthly payment to the IRS?
- Are you withholding enoughfrom your W2?
- Are you current with your tax returns?
- If you pay estimated quarterly payments, are they current?
- Can you prove your current income and expenses with authentic and official documentation?
- Do you anticipate your income increasing soon?
Any taxpayer seriously considering filing for CNC status should thoroughly review these questions before beginning the process. If you believe you might be eligible, please reach out to S.H. Block Tax Services today.
Contact S.H. Block Tax Services for Help Filing for CNC Status
If you’re struggling with tax debt and aggressive collection efforts, S.H. Block Tax Services may be able to help you enroll in the IRS’ CNC program. Our attorneys and support staff have decades of tax representation experience, and we pride ourselves on our empathetic approach and the personalized attention we give to every client.
Please schedule your free consultation by completing this brief online form or by calling (410) 793-1231. We understand how difficult it is to satisfy your debts under the excessive burden of the IRS’ and the State of Maryland’s collection strategies, and we’re here to help in any way we can.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.