Big corporations are known for getting all sorts of breaks, but when average people fall behind, they rarely receive help. When you owe back taxes but can’t afford to pay them, you may qualify for a special tax status known as currently not collectible (CNC). In a nutshell, if the IRS agrees you can’t pay both your taxes and your reasonable living expenses, it may place your account in CNC status.
You can request CNC status by submitting the proper form and proof of your income and expenses, as well as documentation of your assets and loans. Be sure to gather copies of all your bills, your most recent pay stubs, and statements detailing other sources of income such as alimony, pensions or investments. If the IRS determines that your necessary expenses exceed your income, you will be notified of your status. And if you’re approved for CNC status, the IRS must not only cease its collection efforts, but can no longer garnish your wages or seize your property.
Not a permanent solution
Keep in mind, CNC status only applies to back taxes. You will still have to file tax returns, and are not exempt from paying current and future taxes. You will also continue to accumulate penalties and interest on your unpaid taxes. After a year or two, the IRS may review your status, and if you’re able to begin paying your back taxes, then you must do so.
Statute of limitations
The IRS can attempt to collect outstanding taxes for only 10 years from the date the taxes were assessed against you, which is usually the date you filed. If at the end of this 10-year period the IRS hasn’t collected, the taxes are no longer owed.
Advice you can trust
In difficult times, many individuals and businesses have trouble meeting their commitments. Reaching out to our firm for a confidential consultation may give you some peace of mind. Call the tax professionals at Magone & Company at (973) 301-2300 for a specific evaluation of your situation.