Worrying about how to make ends meet is difficult, but the added pressure of having to pay taxes when funds are short can be overwhelming. If you are unemployed, have suffered a financial hardship, or for any other reason cannot afford to pay your taxes, you might be eligible for the IRS to designate your taxes as “currently not collectible (CNC).” With CNC tax status, the collection of your federal taxes is delayed until you’re on more solid footing.
How to Obtain CNC Tax Status
Taxpayers who find themselves in the unfortunate situation of being unable to pay their taxes can apply to the IRS for currently not collectible status. If granted, this allows the taxpayer to defer payment until he or she is more financially stable. But applying requires the collection and submission of specific financial records. The chances of acceptance into the CNC tax program are greater with the experience and persuasive reasoning presented by an experienced Indianapolis tax attorney to guide you through the process.
How to Apply for CNC Status
In order to obtain CNC tax status, you must prove to the IRS that you are financially unable to pay your taxes. In evaluating your request for CNC status, the IRS follows procedures set out in an Internal Revenue Manual regarding CNC status. In short, the IRS will look at your entire estate, including savings and other assets, as well as your current cash flow—anything above the money needed to pay for necessary living expenses—and financial obligations.
In order to obtain CNC status, you must show an inability or meager ability to pay basic living expenses. You will likely need to file a financial statement and/or provide other documentation of your income and expenses. These are some examples of documentation to prove your inability to pay taxes:
- Proof of income;
- Family expenses; and
- Health-related expenses.
Do not delay investigating your eligibility for CNC program Failure to pay taxes can result in significant interest and penalties—regardless of your inability to pay—further complicating your financial situation.
What It Means if You Are Granted CNC Tax Status
Once the IRS has made a CNC determination, the agency will delay attempting to collect taxes while you remain in CNC status. However, while you are in CNC status, the IRS may take any of the following actions:
- Place limits on acceptable living expenses;
- Retain tax refunds in future years to apply toward your tax arrearage;
- File a federal tax lien for an unpaid tax obligation greater than $10,000;
- Modify the terms of your CNC status if merited by a change in your financial situation; or
- Write off your unpaid tax obligation if it appears that your financial situation will not improve.
With so much riding on a determination regarding CNC taxes, you are best served by working with an experienced Indiana tax attorney, who can contact the IRS to determine what is required to prove your financial hardship and assist you in submitting the proper documentation in a way that persuasively presents your case.
How Long Does CNC Status Last?
CNC status can be temporary. The IRS reviews your CNC status on a periodic basis to determine whether your financial situation has improved. You may need to provide updated financial information to the IRS to help the agency reevaluate your CNC status. An Indianapolis tax attorney can be incredibly helpful in gathering updated information requested by the IRS and communicating with the agency on your behalf.
If the IRS determines as a result of reevaluation that you are able to pay taxes, your taxes will no longer be designated in CNC status, and you will be required to pay the tax obligation that had been put on hold through the CNC program.
Where to Turn for Help Dealing with CNC Status
If you find that you are unable to pay your taxes, either because you are unemployed, have suffered a financial hardship, or for any other reason, call Indianapolis tax attorney Julie A. Camden at Camden & Meridew, P.C. Julie can help evaluate your eligibility and prepare your application for CNC tax status, an offer in compromise, an installment agreement, or other relief. For a consultation, call 317-770-0000 or complete the firm’s online contact form.