What if tax payment ceased to exist for the period of financial hardship? Wouldn’t it be great if we don’t have to pay taxes for the duration of our financial slowdown? It may sound too good to be true, but the IRS understands this existential need for taxpayers and provides them a facility that stops the tax payments for some period. IRS’s Currently Not Collectible or CNC status on tax payment provides taxpayer relief of not paying tax without affecting their credit score or without pushing collection tactics against taxpayers for the period of hardship.
Life isn’t always easy, and circumstances change. Sometimes, we are in control of everything, and nothing seems impossible to achieve. Some months or years later, we seem like at the bottom of the universe, and nothing seems to be working for us. Taxes are the first casualty among the expenses that are missed during such difficult times, and if you are a resident of Phoenix, AZ, then you have to pay the 11th highest tax rate in the US. However, the IRS doesn’t care what you are going through unless you inform them, and these missed taxes accumulate over time to become your tax debt.
Taxpayers basically act as consumers for the IRS. They pay taxes and contribute towards the smooth functioning of the system. In other words, taxpayers empower the government to exist and enforce the rule of law. Tax Authorities understand this, and they try to provide relief to taxpayers as much as they can without hindering the system.
These reliefs are offered in many forms. Some taxpayers think that they can’t pay back taxes all at once but have enough monthly income that they can pay what they owe to the IRS in monthly installments along with new taxes.
In other cases, taxpayers aren’t in a good financial position, and they are on the brink of bankruptcy. The IRS offers them to avail OIC or offer in compromise, which enables them to pay a fraction of the amount owed and settle the full liability.
What Is Currently Not Collectible Status?
CNC is the facility for those who think that their financial position will get better after some period if they get tax relief at the moment. All you have to do is to apply for CNC, and the IRS will analyze your financial situation.
If the IRS’s financial examiner approves that your taxpayers’ financial position doesn’t allow them to continue to pay taxes or pay-off back taxes, the IRS allows such taxpayers to defer their tax payments for the period of financial hardship.
Points To Consider Before Applying For CNC
One example of such taxpayers is unemployed people seeking a job in the job transition period. You need to consider the following point before applying for CNC;
- The IRS will look for any savings or assets that you can dispose of to pay taxes. This doesn’t include your residence or business property.
- The IRS will need you to provide proof of your monthly average income and living expenses. This is to find out if you can pay taxes in installment, which we discussed earlier.
- A financial statement or Form 433 will need to be furnished to analyze your financial position.
Last but not the least, always keep in touch with the IRS. If you are afraid of them and try to avoid them, then the IRS might think that you are trying to evade tax, which is a federal criminal offense.
Keep in contact with the IRS and share your financial standing with them. You may find more relief than hardships.
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Zee Maq is a content writer who specializes in writing business and finance content. She has nine years of experience and loves to provide problem-solving content to help people tackle challenges in their everyday lives.