Written by Peter McFarland, Esq.
So you’ve filed your tax return. Maybe it was late and the IRS added penalties or maybe you just couldn’t afford to pay what the return said you owed. Now the IRS is sending notices and you just can’t possibly pay them.
If you find yourself in this situation, there is some good news. The IRS knows that for many, paying a large tax bill could spell financial ruin. The IRS has many programs available for such situations, including monthly installment agreements, offers in compromise, and a special currently not collectible status.
A quick note: other articles on this website focus on installment agreements and offers in compromise. The purpose of this article is to focus on the currently not collectible status.
What is Currently Not Collectible?
When your necessary expenses outpace your income, the IRS recognizes that you cannot pay your tax bill. If you successfully negotiate for the currently not collectible status, the IRS will place your account on hold and wait until your financial picture changes before attempting to collect your unpaid tax liability. Interest and penalties, however, will continue to accrue while the amount remains unpaid.
How do I Request Currently Not Collectible Status?
Taxpayers may make the request using the IRS’ Form 433-F. Similar to setting up an installment agreement or negotiating an offer in compromise, taxpayers list their assets, income, and necessary expenses. If a taxpayer’s necessary expenses outpace their income, the IRS will consider placing the taxpayer’s account in currently not collectible status, sometimes called CNC.
What are “Necessary Expenses?”
In the course of this article, I have been very careful to say that “necessary expenses” must outpace income. Necessary expenses do not include all expenses that a taxpayer may actually pay monthly. Rather, the IRS averages expenses of all taxpayers within the taxpayer’s county and limits the amount of expenses a taxpayer may claim to be in line with those averages.
The use of these averages can mean that even though you live paycheck to paycheck, the IRS may disallow expenses you actually pay and argue that you could pay more monthly toward your unpaid tax. For taxpayers considering requesting this currently not collectible status, the use of these averages could mean that the taxpayer does not qualify and must instead make monthly payments on an installment agreement.
It is crucial, therefore, to speak to a professional or someone who has experience in negotiating for this status. The difference between non collectible status and an installment agreement could mean the difference between financial ruin and meeting financial obligations. The attorneys at Estill & Long, LLC have successfully negotiated for this not collectible status for many clients and can help you do the same!
If you find yourself in the situation where you can’t pay a tax bill, the currently not collectible status may provide a way to avoid enforced collection of your unpaid tax liability. Negotiation can be very difficult, however, because the IRS will only allow necessary expenses and the taxpayer is basically asking the IRS to not collect the debt for a certain time. Therefore, it is best to speak to someone experienced before discussing your tax liability with the IRS.
Estill & Long, LLC is very experienced with all manner of situations dealing with unpaid taxes and the IRS. Our attorneys have successfully negotiated hundreds of installment agreements, offers in compromise, and also excel at obtaining this special not collectible status from the IRS. Our attorneys will draw on this experience when helping you with your tax situation.
About Peter McFarland, Esq.
Peter earned his Juris Doctor (J.D.) degree at the University of Denver. After becoming licensed to practice law in the State of Colorado, he earned his Master of Laws (LL.M.) in Taxation at the University of Denver. In his current role, Peter represents taxpayers before the IRS and in the United States Tax Court. He gained valuable experience as an attorney with the University of Denver’s Low Income Tax Clinic during his graduate school studies and has been representing clients at Estill & Long, LLC since his arrival in early 2013.