No Money + No Job = CNC, typically
January 9th, 2007People who have tax liabilities, but have absolutely no assets to leverage, cash to pay, and no job, will be considered “Currently Not Collectible” (CNC) by the IRS. They won’t know you’re CNC qualified unless you prove your status to them. This status is definitely a god-send for those who need a little breathing space from the collection activities of the IRS. Mind you however, interest penalties will still accrue against your account while in CNC. What’s interesting is that the Collection Statute of Limitations is still running (rather than being tolled during any court proceeding), which means that once the statute runs, the IRS cannot collect for the liabilities assessed for that particular year’s liabilities. The CNC status usually expires when your financial situation improves.
The funny thing about being under CNC is that it is not an OIC or “Offer-in-Compromise”. An OIC, like an Installment Payment, is an agreement made between you (the taxpayer) and the IRS concerning how you will pay your tax liabilities. An OIC is usually less than your total liabilities, while an Installment Payment is a payment plan for all of your tax liabilities. An OIC, therefore, has a difficult set of criteria to abide by. The main unspoken rule that separates an OIC and an CNC is whether you have a job or are retired.
Other options? If you have no money and want to be cleared of your liabilities (rather than being CNC) but do not qualify for an OIC, you could attempt a filing of bankruptcy. However the laws have changed for bankruptcy back in 2005, making the process more difficult for filers.
In the end, as a note, just because you’re on CNC does not mean you’re out of the woods yet.
