CURRENTLY NON-COLLECTIBLE STATUS

How do you qualify?

You must prove to the IRS that you can’t afford to pay.

You might be eligible for CNC if:

• Your monthly expenses are more than your income; or
• Your income barely covers your expenses; or
• You have no income; or
• Your only income is Social Security, welfare, or unemployment

When you speak with an agent, explain your situation. Make sure to be clear that you cannot afford any payments (rather than just being unable to pay the full amount). The agent may try to offer you a monthly installment plan instead. But you should only agree to such a plan if you believe you can afford it without hardship.
Before putting your account in CNC, the IRS will request financial information from you, including information about your monthly income and expenses, as well as any savings, cars, or houses. You may also be asked to fill out a Collection Information Statement, or CIS, summarizing your financial situation
That means you’ll need to document your financial situation for the IRS.

• First, the IRS will look for any nest egg that you may have, like a savings account, to pay your taxes if you don’t need it to pay for necessary living expenses.
• If you don’t have any assets to pay the debt, the IRS will want you to document your average monthly income and necessary living expenses. The IRS is looking to see if you can pay with an installment agreement.
• The IRS may also ask you to file a financial statement (called a Form 433) and may even require you to prove your monthly income (with paystubs and bank deposits) and monthly living expenses (with receipts).

Here’s the catch: The IRS can set limits on your expenses. For example, if your car payment is $1,200 a month, the IRS will limit it to $497.

To get CNC status, you (or your tax professional) must contact the IRS. You can write or call the IRS, but it’s usually faster to interact by phone, because the IRS can tell you exactly what you’ll need to provide to prove your hardship.
Also, if you’re prepared with financial information, such as the Form 433 with documents to prove your income and expenses, you can usually fax them to the IRS during the call – and get an immediate preliminary decision.

If the IRS refuses to label your account as uncollectible, you can request a meeting with an IRS collection manager. You can also appeal the collection actions the IRS takes against you. Alternatively, you may want to contact a tax professional to help you.

Unfortunately, just because you believe you can’t afford your tax bill doesn’t mean the IRS will agree. The IRS has a very narrow idea of what people should be spending on living expenses. The agency has mapped out standards for food, clothing, shelter, and other essential costs for people in different areas of the country, if your expenses exceed these amounts, the IRS typically won’t take them into consideration when reviewing your request for uncollectible status. For instance, if the IRS thinks that you should be spending $1000 on housing and you’re spending $1500, you won’t be able to count the $500 as an allowable expense. Note these are just sample numbers. Additionally, the IRS also won’t take credit card payments or other expenses it considers non-essential into account.
The IRS makes exceptions for certain situations. In particular, if you have a lot of healthcare expenses the IRS will take them into account when reviewing your application. A tax attorney has a lot of experience negotiating with the IRS and a thorough understanding of their allowable living expenses. They can often help you get the largest exemptions possible for your situation.

What are the relevant forms?

• The IRS may ask you to file any past due returns.
• The IRS may ask you to complete Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-F, Collection Information Statement, and/or Form 433-B, Collection Information Statement for Businesses, before making any collection decision.
• The IRS may require documentation to support items listed on your Collection Information Statements.
• The IRS will continue to charge monthly late payment penalties and interest on your
• The IRS will require you to continue to make your Estimated Tax Payments and Federal Tax Deposits, on time.

Who do we contact? (IRS)

Individual taxpayers: 800-829-1040

Business taxpayers: 800-829-4933

What’s the relief acquired?

CNC status allows people in financial hardship situations to defer paying their tax bill until their situation improves. For example, unemployed people often seek CNC status from the IRS.

Is there a completion status? What happens at the end?

CNC and the Collection Statute Expiration Date
Most tax liabilities expire the later of 10 years after they’re assessed or 10 years after the filing due date. The date the bill expires is called the Collection Statute Expiration Date (CSED). If the CSED occurs while your tax account is in CNC status, the tax liability will go away. The IRS will no longer be able to collect on this amount.
There are certain actions that can extend the CSED. For instance, if you apply for an offer in compromise, the CSED clock will stop ticking while the IRS reviews your application, but the time will be added back on once your application is approved or denied.
Similarly, if you file for bankruptcy, the clock will also be paused temporarily and the time will be added on. In some cases, the IRS asks taxpayers to sign a waiver to extend the CSED. Ideally, you should never sign this type of document without consulting with a tax professional.
The CSED is usually 10 years from the date the IRS charged, or assessed, the tax. But in certain

situations, the CSED is automatically extended. For example, the CSED is extended when

taxpayers:

• Request innocent spouse relief.
• Request a collection due process hearing.
• Apply for an offer in compromise.
• File for bankruptcy.
• Live outside the U.S. for six months or longer.

In some circumstances, the IRS may ask that you extend the CSED for a specific period of time.

Once the CSED expires, the IRS can’t collect any remaining balance.

What happens if client’s situation gets worse?

They can keep their CNC status

What happens if client’s situation gets better?

IRS can take them off CNC status. They check income recorded on tax returns

FAQS

How long can I stay in CNC? You can remain in CNC status as long as you remain unable to pay your IRS debt.
My account is in CNC, but I still got a letter from the IRS. Why? The IRS will send yearly reminders of your debt while you are in CNC. Read the letter closely; if it just a reminder, it should say that you don’t need to take any action in response to the letter. Can I stop the IRS from taking my tax refunds? The IRS will take your tax refunds as long as you are in CNC. However, if you are experiencing severe financial hardship (for example, facing eviction or a utility shut off) you may be able to ask the Taxpayer Advocate Service to help you get your refund. But for this program to work you must contact them before filing your tax return to get further instructions about how to file (see right).
The Taxpayer Advocate Service (TAS) is the part of the IRS whose mission is to help taxpayers fix problems that they can’t resolve on their own or that have led to emergency situations. TAS also provides information about taxpayer rights. To learn more, go to
https://taxpayeradvocate.irs.gov/ or call the Philadelphia TAS office at 267-941-66

NY TAXES

12-Month Currently Not Collectible Status (Hardship)Generally, a hardship status is good for one year. You must complete a financial form and disclose financial information annually. The disabled or retired, greatly benefit from this option because they don’t expect their financial situation to change in the future.

If you do not qualify for an Installment Payment Agreement, you can look to apply for hardship status. Generally, a hardship status is good for one year. You must complete a financial form and disclose financial information annually. Good option for disabled or retired as their financial situation wouldn’t change much in the future. However, a tax lien or tax warrant usually will be filed.

Unlike the IRS, the Department of Taxation and Finance does not publicly discuss this option and there are no formal procedures. However, it is available for taxpayers facing difficult situations. i.e unemployment, illness, family issues, fire or floods, and severe decreases in income.

Here are some (but not all) situations where hardship may be the only option:

1. You have a home with more equity than the tax debt but do not want to sell the home or
   cannot get to the equity.

2. You applied for an Offer in Compromise but are young and get denied for that reason.
   NYS might want to wait longer to see if they can collect from you. The State is more patient than the IRS with a 20-year statute of limitations. For comparison, the IRS has 10 years. See our guide on collection statute expiration dates for more information.

3. You applied for an Offer in Compromise but were denied for various reasons, but still do
   not make enough for a payment plan.

Generally, the NYS Tax Department will have 20 years to collect a liability from the date that the tax liability has been warranted. Once a NYS tax warrant is issued, the clock will begin.