Currently Not Collectible (CNC) means that a taxpayer has no ability to pay his or her tax debt. When the taxpayer demonstrates they are in a severe financial hardship and have no ability to make monthly payments or liquidate assets in order to pay their back taxes, the IRS can declare the account “currently not collectible.” In order for the IRS to consider placing your account in CNC status, the IRS agent will have to review detailed financial forms and substantiating documentation submitted by the taxpayer.
Once the IRS declares a taxpayer currently not collectible, the IRS must stop all collection activities, including levies and garnishments. The IRS must send an annual statement to the taxpayer stating the amount of tax still owed. This annual statement is not a bill. While in CNC status, the 10-year statute of limitations on tax debt collection is still running. If the IRS cannot collect the tax within the 10-year statutory period, then the tax debts will expire.
Our tax experts at Direct Tax Relief will evaluate your specific situation to see if CNC status is the best relief option for you. CNC status is considered on an individual basis. In the right circumstances, CNC can indeed provide a good tax solution that permanently solves your tax problem. In other situations it might be a temporary fix to give the taxpayer some breathing room until other tax solutions are available. You need expert tax representation by a qualified professional to get the results that you are looking for.
Does the IRS claim you are a person responsible for unpaid payroll taxes? Is the IRS seeking to secure payment from you personally? We can help!
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To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the Trust Fund Recovery Penalty (TFRP). These taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating in order for the TFRP to be assessed.
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
The IRS will request that any potential responsible parties complete an interview in order to determine the full scope of their duties and responsibilities. A Revenue Officer prepares form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty. Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.
Assessing the Trust Fund Recovery Penalty
If the IRS determines that you are a responsible person, they will provide you with a letter stating that they plan to assess the TFRP against you. You have 60 days (75 days if this letter is addressed to you outside the United States) from the date of this letter to appeal their proposal. If protest against the assessment is not made and appealed to the IRS, they will assess the TFRP.
Once the assessment is made, aggressive collection actions will follow. The IRS will take enforced collection action against your personal assets. They will file a federal tax lien or take levy or seizure action. This includes garnishing your wages or levying your bank account.
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The IRS has 10 years to collect outstanding tax liabilities, from the date assessed. The 10 year mark is calculated from the day a tax liability has been finalized. A tax liability can be finalized in a number of ways. It could be a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. From that day, the IRS has 10 years to collect the full amount, plus any penalties and interest. If the IRS doesn’t collect the full amount in the 10 year period, then they must cease collecting on the remaining balance, since the statute of limitations has expired.
Most taxpayers and even some tax professionals are unaware of the fact that the IRS must collect a tax debt within 10 years. The 10 year period isn’t based upon the year for which the taxes are due but rather the date the liability was actually assessed.
Why is the IRS still collecting on a tax debt from 12 years ago?
As with all IRS rules, the Collection Statute has many exceptions. Some actions that will extend the collection statute date are:
There are some instances where a tax debt from over 20 years ago is still being collected by the IRS! This is why a skilled and experienced Tax Attorney is required to successfully represent you with the IRS. Our tax experts at Direct Tax Relief will request your transcripts from the IRS to analyze and interpret them in order to choose which tax solution is most advantageous to you. DTR will advise you of the best course of action and together we will put an end to your IRS tax problems!
Will the IRS Notify Me Once the 10-Year Statute Expires?
The IRS will NEVER inform you when the 10 years are up. They will continue to send you invoices and collect on the debt. It is up to the taxpayer and their representative to prove to the IRS that the 10 year collection statute has in fact expired. It is very important to note that although tax liens can no longer be enforced, your tax lien may be still on file with credit bureaus or with your local recording office unless it is requested to be released.