Not Collectible StatusWhat is “Not Collectible Status? One way or the other, the IRS is going to get the money that you owe it. If you owe taxes, preferably, the IRS will receive this payment during tax season following the completion and submission of your annual tax return. But for some people that either owe taxes, have fallen behind on taxes or have just flat-out stopped filing tax returns, the fact is that they may not have the financial means to keep up with what they owe to the IRS. If the IRS finds out that they have no chance of collecting what is rightfully owed to them from a delinquent taxpayer, than a particular individual is marked “CNC,” or “currently not collectible status.” This post will take a closer look at how this designation works.
Not Collectible Status : CNC 101: The BasicsAs we noted in the opening, the IRS is going to know if you fall behind paying taxes or filing your tax returns – and it is going to come after you for it, either via mailed notices, phone calls or home visits until you give them what you owe. But if all this fails, it’ll likely enforce collection. This is done by garnishing your salary, taking control of your bank accounts and/or selling off other properties or assets you own. However, if you’re able to prove to the IRS that their actions through enforced collection would present an “economic hardship,” then the IRS will likely place a hold on your status by identifying you as “currently not collectible.” Be warned though that achieving this status is a process, and what you may perceive to be an economic hardship the IRS may merely conclude is just an inconvenience – so it’s a bit of a process to achieve CNC designation and, ultimately, the IRS has the final say.
CNC Payment ProcessLike we’ve been saying, sooner or later the IRS gets what its wants – so don’t think that CNC status is the end to your tax problems. It’s a compromise on behalf of the IRS – no tax is forgiven and you’ll still certainly be subject to penalties that you’ve accrued by failing to pay your taxes or failure to file the proper documentation. So, just how does the IRS get its money? There are a few ways:
- Follow-up date: In some cases, the IRS may designate a follow-up date on your CNC status, meaning that they reopen it and send it back to collections to start the process again.
- Automatic re-opening: Should you fail to file a tax return or continue to let back taxes accrue, the IRS can re-open your case for collection. It can also re-open your case if it’s found that your financial situation has changed and you’re now better able to pay.
- Refund repayment: Many CNC cases are also resolved by arranging that future tax refunds that you’re owed go toward paying unpaid taxes.