On the positive side, if you qualify for status, “you won't face taxes (which the IRS uses to garnish your salary or block your bank account until you pay taxes). However, on the downside, you will still be subject to federal tax levies on your home or property. The Internal Revenue Service (IRS) can currently declare a taxpayer unable to pay their outstanding tax liability (CNC). The burden of proof is on the taxpayer to qualify for “difficult cases.” The temporary nature of the uncollectible condition is another drawback; the IRS has the right to reevaluate your case periodically.
Ongoing interactions with the IRS and uncertainty can be stressful. One of the best ways to guarantee uncollectible status is to file unfiled tax returns and the current year's tax return, even if you can't pay. If the taxpayer's income has increased, the IRS will remove the taxpayer from this state and ask them to complete a new financial statement to determine if they can make payments. An installment agreement is an agreement negotiated with the IRS that allows you to pay your tax debt in affordable installments.
Although the IRS believes that it is currently not collectible given its current situation, it will later reassess its capacity and capacity to pay its tax obligations. To show that you are struggling financially, you must show that, after the expenses, you don't have the disposable income to pay back taxes. The IRS may ask you to show proof of your monthly income (with bank deposits and pay stubs) and of your monthly living expenses (with receipts). Documentation of monthly expenses related to food and basic necessities, medical and child care expenses, and court-ordered payments, such as child support or spousal support.
If you received a notice of intent to collect, your salary is garnished, or you need a general overdue tax relief, read on to learn more about this non-collectible condition by the IRS and if you might qualify. Another advantage of this status is that you won't be subject to taxes (which is what the IRS uses to garnish your salary and block your bank account until taxes are paid). Statistics show that taxpayers who try to qualify on their own for “currently uncollectible” status from the IRS are often unsuccessful. The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayer rights.
Once the taxpayer becomes part of a CNC, the IRS will monitor their tax returns every year and check if their income has increased. An exempt organization, corporation, or limited liability company (LLC) is identified as the responsible taxpayer that is liquidated in the event of bankruptcy (cc0). When an account is currently designated as uncollectible, it temporarily stops the IRS collection process, meaning there are no harassing letters, intimidating phone calls, or threatening taxes. You may want to consider other possible payment options within your possibilities before asking the IRS to place your account in CNC status.