Currently Not Collectible (CNC) is a temporary agreement from the IRS to stop attempting to collect your past due taxes. It can provide financial and mental relief from the constant pressure of owing the IRS money.
CNC status isn’t the right choice for every situation, but it does offer the following benefits:
No IRS Levies
IRS levies are one of the biggest concerns for people who owe back taxes. The IRS has the ability to seize many types of assets and income, including:
- A portion of your wages from every paycheck.
- The full amount of any bonuses or commissions you receive.
- A portion of certain Social Security benefits payments.
- The money in your bank account.
- The money in your retirement account.
- Your business assets.
As long as your account remains in CNC status, the IRS won’t issue any of these levies. However, they may keep your tax refunds and apply them to your outstanding balance.
No Monthly Payments
You won’t have to make regular payments towards your debt while in CNC status. If your barely making ends meet, this could allow you to stay afloat financially for a while.
You also won’t have to worry about missing a monthly installment plan payment and going into default.
Time To Make A Plan
CNC status gives you time to come up with a long-term plan. If you qualify for an Offer in Compromise, you can get your application material together. You can also see if you’re eligible for penalty abatement or innocent spouse relief.
If you have a remaining balance after exploring those options, you can pay it off in an installment agreement.
While CNC status can help in some situations, it also comes with some downsides. First, your balance will continue to increase because the IRS will continually assess penalties and interest.
As noted above, your tax refunds may be seized while in CNC status. A Notice of Federal Tax Lien can also be filed, making it difficult to sell, refinance, or borrow against your home.
It is best to contact an tax attorney to help you determine whether to use Currently Not Collectible status as part of your comprehensive tax resolution plan.
Have a question? Contact Venar Ayar.