IS IT REALLY POSSIBLE TO OWE THE IRS AND PAY NONE OF IT BACK?
Do you owe money to the IRS but, right now, you cannot afford to pay?
Are you worried the IRS will levy your paycheck or your bank account and leave you with nothing to pay your living expenses?
If you answered yes to either questions above, then you might qualify for what is called Currently Not Collectible Status—an agreement whereby you will not have to repay any of your tax debt (at least for the time being).
Like most problems in life, if you know the right people and if you know the right information, you will solve your IRS problem.
What am I talking about?
Well, not that you can expect the IRS to tell you, but the IRS rules require the IRS to refrain from collecting from you if you cannot afford to pay (i.e. your income minus allowable expenses show you lack the ability to pay, and you are otherwise unable to generate funds from which you could repay your tax liability).
In IRS speak, the IRS calls this placing you in “Currently Not Collectible Status,” also known internally within the IRS as “Status 53.” For short, Currently Not Collectible Status is often referred to as “CNC.”
YOU MAY ASK, “WHAT'S THE CATCH ?"
Well first thing, the IRS will continue to tack on interest and penalties even if the IRS places you in CNC (the same applies even if the IRS places you on a monthly payment plan).
Second, if the IRS has not already done so and you owe more than $10,000 (typically), the IRS will file a lien (i.e. a public notice that you owe the IRS taxes). In IRS speak, the IRS calls this a “Notice of Federal Tax Lien Filing.”
Lastly, the IRS will periodically (e.g. every 18 months or sooner if your financial picture materially improves) require you to update your financial information to see if you can afford to start paying.
Importantly, like other resolutions—after the IRS places you in Currently Not Collectible Status— the IRS will terminate your Currently Not Collectible Status and send your case back to collections if you fail to timely pay or timely file your taxes.
Keep in mind, if you withhold or disclose false material information to the IRS, the US Department of Justice may bring criminal charges against you alleging you committed fraud.
What is the benefit if the IRS places you in Currently Not Collectible Status?
The most important benefit (and most obvious) is that you rest easy knowing the IRS will refrain from collecting from you. You will not have to worry about IRS bank levies, wage levies, and other collection actions so long as you remain in CNC.
Further, should the collection statute of limitations (i.e. generally, 10 years from the date the IRS assessed the tax liability) run out, the IRS cannot collect (the IRS writes off the tax debt for the specific taxes where the collection statute of limitations expired). Note, certain actions pause the collection statute of limitations clock such as filling certain types of appeals, filing for bankruptcy protection or submitting an Offer in Compromise.
On a related note, if you qualify for the IRS to place you in Currently Not Collectible Status, you may want to look into a different resolution strategy to try to settle your tax debt for possibly pennies on the dollar. In IRS speak, the IRS calls this an “Offer in Compromise.” If you want further information about an Offer in Compromise, check out this Fortress article.
As I stated in the beginning of this article, like most problems in life, knowing the right people and the right information makes all difference as to whether you resolve your tax debt situation.
The IRS trains its collection representatives to try to collect from you as much as they can as fast as they can. As such, expect the IRS collection representatives to keep a tight lip about placing you in CNC or any other rules that benefit you.
Even if you request the IRS collection representatives to place you in Currently Not Collectible Status, you have to know what expenses the IRS allows, what proof you need to submit, and so on.
If you have a serious tax liability, it is often wise to hire the best to help you resolve your case. Just be careful. Unfortunately, there are is no shortage of tax relief firms who make false promises or provide shoddy representation. Hiring the wrong tax pro could even make your tax issues worse.
On a brighter note, it is possible to find assistance that will make the process easy and, more often than not, provide you with a much better result than you could have procured on your own. Your best bet is to find the right type of tax professional for your particular situation, and to do your homework to make sure they are reputable.
With the vast majority of tax liabilities that wind up in collections, the accounting/number-crunching phase has already taken place. The work that remains includes protecting you from enforcement, defending your rights, and advocating on your behalf. Strong written and oral persuasive skills coupled with a firm grasp of the tax laws are what most often win the day. Consequently, you may be better off choosing an attorney with experience handling tax collection cases than you would be with an accountant.
It is also important to make sure that whomever you hire is reputable. Take a few minutes to check out the professional’s or the tax relief firm’s Better Business Bureau rating. You have plenty of choices, so you might as well choose someone with an A+ rating.
I would also encourage you to skim through some of the firm’s online reviews. If they are overwhelmingly positive, then the chances are good that you’ve found a firm that is committed to providing a service that is both ethical and high in quality.
A good starting point would be to call Fortress Tax Relief. We have caring and knowledgeable professionals on staff who would be happy to evaluate your situation and outline a solution for you at no charge. You might be pleasantly surprised to learn that you qualify for CNC or a settlement for a fraction of what you owe, so give us a call!