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IRS Hardship: Tax Uncollectible Status - Currently Not Collectible - How it Works

There are times in life when we face situations that are unforeseen or beyond our control.  When these events are financial in nature and affect our ability to pay our financial obligations, they can cause major problems with our personal finances.  When taxpayers experience such an event, it may result in their inability to pay tax liabilities. A common misconception about the IRS is that there are no options available beyond immediate payment of back taxes.  While it is true that dealing with the IRS is very different than dealing with a lender or other type of creditor, there are options available if you are experiencing a true financial hardship.  Here we look one such option and whether or not your situation qualifies.  Keep in mind that the following option does not resolve your tax problem or eliminate your tax liability, however it may provide the time needed to get your financial affairs in order.

Currently Not Collectible "CNC"

If you are experiencing a financial hardship which makes it impossible to repay your tax liability owed to the IRS you may be eligible for an IRS hardship.  When certain conditions are met and you qualify for the IRS hardship, you may be declared "currently not collectible" by the IRS. When this happens, the IRS will temporarily cease collection efforts.  This does not mean you no longer owe the tax liability, but rather the IRS concedes that aggressive collection actions will only serve to create an additional financial hardship for a person already struggling to make ends meet.  Your financial situation will be revisited in the future to determine if and when collection actions can continue. 

Who Qualifies for this Status?

Any taxpayer who meets the requirements for an IRS hardship may qualify for the currently not collectible status.  These requirements include proving that collection of taxes owed would prevent you from feeding yourself, paying for housing, keeping utilities, paying for transportation to your job, paying necessary medical expenses, paying for clothing or a loss of educational opportunities.  Keep in mind that the IRS will make their decision based what is considered reasonable and necessary expenses.  For example, if you are accustomed to paying $400 for designer clothing but can get by with $100 non-designer items, that is not considered reasonable and necessary.  Basically you must prove that if the IRS were to collect taxes owed, you would be unable to provide the basic necessities needed for survival. 

How Do I Apply for Currently Not Collectible Status?

It is always recommended taxpayers consult with a tax professional when dealing with the IRS regarding back taxes.  In this situation, a professional familiar with tax law and IRS policies can help you fill out the appropriate paperwork needed to apply for currently not collectible status.  This includes filling out form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals as well as gathering other necessary documentation.  You will need copies of the following to submit to the IRS along with Form 433-A.

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