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Why Your Tax Debt Might be Currently Not Collectible

October 30, 2014

You may feel a financial strain from day-to-day living from simply not making enough money or being stretched too thin with credit card debts. If you add a tax debt into the mix, it may push your finances to the breaking point. Fortunately, the IRS makes exceptions for those facing financial hardship as a result of having to pay back taxes.

Depending on the severity of your circumstances, you may be eligible for Currently Not Collectible status with the IRS. Currently Not Collectible, or CNC, means exactly what it suggests; the government cannot pursue collection efforts against you for a certain period of time. While there may be a variety of contributing factors specific to your situation, there are four typical scenarios that can result in you being Currently Not Collectible.

Poor Health

If you’re in the unfortunate position of being chronically ill, or perhaps the victim of an accident that prevents you from working, you may be granted CNC status.

Overextended

In the event that you’ve got more going out than you have coming in, the IRS may determine that you can’t afford another bill – even for tax debt.

Unemployed

One very good reason for not being able to pay your bills is unemployment. If your monthly income, or lack thereof, simply does not allow for a payment to the IRS, you may be classified as CNC.

Lack of Assets

You may not own your own home or car or assets of any value. If you don’t, it may be safe to assume that you have no equity, either. Since the IRS cannot take money from property that doesn’t exist, they may have no choice but to suspend collection efforts against you.

Important Considerations and Professional Help

There are a few things to keep in mind if you’re Currently Not Collectible. First, although collections may be halted, additional charges will not. If your situation improves and the IRS resumes action, your debt amount will be adjusted to include any accrued interest and penalties. Also, even if you are in CNC status, the IRS may still place a lien against you. This means that they can collect any money, assets, or property you come into possession of. A lien may impair your ability to obtain a loan or even a credit card.

Currently Not Collectible is normally a temporary classification, but it’s possible that your situation will not improve. If you think you’re a candidate for CNC status, you’ll want to talk with a tax resolution company. Requesting consideration for Currently Not Collectible can be tricky; a licensed tax professional can make sure no details are overlooked that would prevent you from getting temporary relief from IRS collections.