What happens when you cannot afford to pay the IRS? Many Americans find themselves with a large tax bill from the IRS that they cannot afford to pay. You may be receiving threatening letters from the IRS or a Revenue Officer may have even shown up at your door. There are several strategies to deal with the IRS and for some people, there is even a way to avoid making payments to the IRS at all, for a period of time, if the IRS determines that you do not currently have the ability to pay.
What is Currently Not Collectible?
Currently Not Collectible (“CNC”) is a special status by the IRS for taxpayers who cannot afford to make any payments towards their tax debt. Unfortunately, what you think you have the ability to pay and what the IRS determines you have the ability to pay, usually do not line up. The IRS has stringent requirements individuals must satisfy in order to qualify for CNC status and it is important. It is important that you speak with a professional that is experienced in negotiating CNC status with the IRS.
What Happens when you are in CNC?
When a taxpayer’s account is put into CNC status the IRS will stop all collection efforts against you, including bank levies and wage garnishments. However, the IRS will continue to charge interest and apply penalties to your account. In addition, they will keep your tax refunds and apply them to your outstanding bill. The IRS will also continue to send an annual bill because it is required under the law.
Once an account is placed in CNC status, the case will usually be automatically be re-opened and collection activities will begin again if the taxpayer fails to file a tax return or creates new tax debt. Also, in some cases, the IRS may open the case back up if the IRS has information that the taxpayer’s financial situation has changed, and the taxpayer can now afford to make payments towards the liability. Otherwise, the account could remain in CNC status for several years, sometimes the account will remain in CNC status for so long that the IRS can no longer take any collection efforts. The IRS has ten years from the date of assessment to collect any tax owed on a particular return; any amounts owed after the ten-year period cannot be collected by the IRS.
At Smith, Barden & Wells, PC we will evaluate your entire financial situation to determine which legal strategy is the best solution for your IRS issue. Contact our office today at 804-794-8070 to schedule a consultation with one of our attorneys.