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Currently not collectible status: can it help me?

Owing back taxes can feel like a crushing burden when your financial situation does not allow you to make any tax payments without cutting into your food or shelter budget. The IRS is aware that some people lack the money to pay their outstanding taxes and may defer collection efforts by putting debtors into currently not collectible status.

Moving into CNC status may be the relief you are looking for during a tough time. Still, you should understand how it works before requesting CNC status from the IRS.

You must qualify first

The IRS will probably require you to provide financial documents to verify that you lack the finances to pay your taxes. The IRS will also want to know that you cannot secure other financings through selling off assets or taking out a loan. You may have to fill out forms such as Form 433-A, Form 433-B or Form 433-F to support your case.

The IRS will still add to your bill

Attaining CNC status means you should be free from income and asset levies. Still, this will not stop the IRS from adding penalties and interest to your tax bill. By the time your CNC status expires, your tax debt will likely be higher than before you applied for protection.

Improved finances may invite collection efforts

If the IRS sees that you have a rise in income, the agency may determine that you can pay your outstanding balance and start collecting from you again. However, you could send payments to the IRS of your own accord during CNC status, which may reduce the overall amount you have to pay when your CNC protection expires.

While CNC status can help people in a financial pinch, it is not for everyone and is not the only avenue available to help you with your tax debt. Review your options carefully to find one that best fits your situation.