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Currently Not Collectible

Maryland Tax Attorneys helping Baltimore, Annapolis and Washington D.C. metro residents establish CNC status.

There are times when financial obligations make it impossible for individuals to pay their back taxes or even meet their minimum monthly payments. The Internal Revenue Service (IRS) categorizes certain tax cases as currently not collectable (CNC), or Status 53, after it has established that its agents are unable to collect on delinquent taxes owed.

Once the agency declares a taxpayer as CNC status, all IRS tax collections must be halted, including wage garnishments, liens and levies, and seizures of assets. In order to receive currently not collectible status, you must prove that your cash flow is only enough to pay for your daily life necessities, which by IRS standards are known as “reasonable and necessary” expenses.

IRS Tax Collections – Currently Not Collectible

In most scenarios, a thorough financial disclosure is required before the IRS will deem a collection case as CNC. Mortgage statements, loan documents and proof of incoming wages must all be submitted along with accurate records of all liquid assets such as investment and bank accounts and insurance policies.

To apply for this forbearance by the IRS, taxpayers must be prepared to submit meticulous records that effectively demonstrate they would have no money left after covering expenses like mortgage, rent, child support, car payments or medical bills. As tax attorneys know all too well, CNC status is only a provisional solution to a larger problem, since the back taxes are not forgiven and interest continues to accrue.

Rosenberg Martin Greenberg are tax attorneys in Maryland who can review CNC status and establish which legal strategy is the most appropriate for your particular situation. Those who are facing economic hardships and are unable to enter an IRS installment agreement are encouraged to retain competent legal counsel before enforced IRS tax collections are imposed.

Obtaining “Currently Not Collectible” Status

In order to prove that you qualify for CNC status, a taxpayer must demonstrate that they have no viable assets that could be liquidated to come into compliance with the IRS. Agents from the IRS will look at home equity to see if one can refinance their mortgage, as well as the quick sale value of other assets that, once sold, would not affect the taxpayer’s health and welfare or production of income.

Before the IRS stops collections or places a case in CNC status for self-employed individuals, the taxpayer must become compliant with estimated tax payments. Those who are not self-employed have to file all missing tax returns and address any underpayments in order to pursue an uncollectible status with the IRS.

Once the IRS declares a CNC case, the taxpayer will receive an annual statement that stipulates the amount of tax still owed. It’s vital to note that while in a currently not collectable status, the statute of limitations (10 years) for tax debt collections is still running.

The IRS Policy 5-71 explains its authority for a CNC case as follows:

"If, after taking all the steps in the collection process it is determined that an account receivable is currently not collectible, it should be so reported in order to remove it from active inventory
A hardship exists if the levy action prevents the taxpayer from meeting necessary living expenses."

CNC Status a Temporary Solution

One of the main obstacles in obtaining CNC status is the IRS’ interpretation of reasonable and necessary expenses, as what is most assuredly a financial burden to you may seem a slight inconvenience to the IRS.

Generally speaking, the average taxpayer in CNC status is:

  • On a fixed income or currently unemployed
  • Disabled or ill and unable to work
  • Unable to pay for daily living expenses
  • Has few or no assets that could be liquidated to repay tax debt

Rosenberg Martin Greenberg reminds taxpayers that currently not collectible status can stand for up to two years, and may be renewed indefinitely.

The IRS may choose to remove CNC status under the following circumstances:

  • You owe new taxes after filing a return
  • An expiration date has been imposed on your CNC status
  • Your take home income has improved
  • You fail to file future tax returns

How Rosenberg Martin Greenberg Can Help

CNC status, while providing immediate relief from aggressive IRS collections, is not permanent. Taxpayers often have other tax relief options such as entering into an installment agreement with the IRS, or making an Offer in Compromise, when eligible.

If you are under financial strain and would like the guidance of experienced professionals who specialize in tax relief for Maryland and Washington D.C. residents, contact Rosenberg Martin Greenberg. Our tax lawyers will see if you qualify for currently not collectible status and review your best options for both immediate and long-term solutions.

To arrange your private consultation, please call Brian Crepeau at 410.649.4981 or email bcrepeau@rosenbergmartin.com.

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If you are seeking counsel for a tax related legal matter, contact the Rosenberg Martin Greenberg Tax Controversy experts.

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Rosenberg Martin Greenberg

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Phone: 410-727-6600
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