Many people have trouble paying their taxes. The IRS recognizes that circumstances may temporarily prevent you from meeting your tax obligation. For that reason, the law allows some people to qualify for Currently Not Collectible status.
In essence, CNC status means that the IRS agrees to temporarily refrain from on your tax bill. You must request CNC status, and the filing process can be complex. However, if you qualify, this alternative can save you and your family a great deal of financial stress.
What are the qualifications?
The CNC designation is for people in serious financial hardship. You may qualify if, for example, you recently lost your job and have no source of income. You may also qualify if your income falls below certain guidelines and your basic living expenses consume all your earnings with less than $100 left over. If you have money or assets that would cover your tax bill, you will likely not qualify.
Will I ever have to pay?
If you qualify for CNC status, the IRS will delay collecting your taxes, but it will not forgive your obligation. Once your hardship situation changes, you will need to pay in full. You will also owe interest and penalties.
How do I request CNC status?
The IRS will not reach out to offer the CNC option; you must initiate the request, usually by phone. After that, you fill out the forms and provide the financial information the IRS requests. It can be a lengthy process.
You may not qualify for CNC status, or you may find that another alternative is better for you. Each situation is different. If you have questions, consult a professional before deciding on a course of action.