What is a currently non-collectible?

If you agree that you owe money to the IRS but your financial situation makes it impossible to do so without causing financial hardship you may qualify for a Currently Non-Collectible status.

Is my debt forgiven forever?

If you financial situation changes, where you are able to pay your tax debt or a portion it, then you may be required to pay back your debt, as long as your statute of limitation has not expired. If your financial situation remains as such you are not able to pay part or all of your outstanding tax debt, you will not be required to make payments.

We will gather information from you about your tax situation as well as your financial situation. We will work with you to see what your estimated future income might look like, and then we will advise you on making use of the CNC program, if it’s appropriate for you.

What is Trust Fund Penalty?

A Trust Fund in terms of employment tax should not be mistaken with a trust fund in terms of wealth management. This is the payroll tax amount assessed to the officers of the business. Tax resolution can help reduce and or arrange the payment of these taxes.

What is a Trust Fund Recovery Penalty (TRFP)?

A Trust Fund Recovery Penalty can be assessed if the unpaid trust fund taxes cannot be immediately collected from the business. This often happens if the business falls on hard times and taps into that fund for any reason. According International Revenue Code 6672(a) an individual can be held liable for penalty for willful failure to collect, account for, or pay to the IRS the taxes for the business.

Who is Held Responsible for the TRFP?

According to the IRS, the TRFP can be assessed against any person who is: responsible for collecting or paying withheld employment taxes, willfully fails to collect or pay the taxes.

Currently Non-Collectible

What is Currently Non-Collectible (CNC)?

You may owe the IRS money but your financial situation makes it impossible to pay. Doing so, would cause financial hardship or result in your inability to pay for your basic living expenses. In this case, you may qualify for a Currently Non-Collectible status (CNC). Currently Non-Collectible is a status in which the IRS cannot collect on tax debts or impose liens.

When the IRS deems your account CNC, they will typically refrain from collecting any tax debt from your account by force (i.e., levying your assets). Furthermore, this status also stops collections communication from the IRS. They cannot send you collection letters or call you as they halt all attempts at collecting from accounts with this status.

CNC status does not stop the IRS from assessing interest and penalties on your account or withholding your refunds. It simply stops them from collecting on it. Furthermore, if your financial situation improves within 10 years of being given the CNC status, they can collect that tax debt. However, if your financial situation has not improved within 10 years, the IRS will likely wipe your slate clean and write off your tax debt, interest and penalties.

Are You Eligible for Currently Non-Collectible Status?

To be eligible for Currently Non-Collectible status, you must demonstrate that you are unable to pay off your tax debt. You must show proof through bank statements and other documentation of your inability to pay. Paying tax debts would cause financial hardship or the inability to cover basic living expenses. Typically, in order to be accepted for Currently Non-Collectible status, you must have filed all tax returns. This includes those that are past due or the IRS will request for you to do so. The IRS will determine you eligible for Currently Non-Collectible status if:

What Are Basic Living Expenses?

Healthcare

Transportation

Housing

Utilities

Food

Clothing

The IRS will calculate your living expenses and subtract them from your wages. They will consider your account CNC if paying the tax debt leaves no money left to cover basic living expenses or creates a financial disadvantage.

Consequently, CNC status benefits those facing delinquent charges on their tax account. Additionally, this benefits those who have exhausted all other options, such as making installment payments. However, those on CNC status must keep current with their tax obligations or risk losing this protective status.

Next Step

The application process for Currently Non-Collectible status involves many calculations and the submission of many forms. Only a tax professional can navigate the complicated CNC process. Once your situation improves, the advise of a tax professional can keep you on track. Typically, if you are CNC status and your financial situation improves, it is best to file for an Offer In Compromise. Give us a call today and we can help you decide if filing for Currently Non-Collectible status is the best course of action for you and your business. Visit our tax resolution page for more services.